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Finance Clippings's Blog

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Why 8.5% is delusional

July 20, 2017 Comments (0)

I am quoted today in an article on Bloomberg.com about the Connecticut pension fund return assumptions.  The article is here:  https://www.bloomberg.com/news/articles/2017-07-20/connecticut-sinks-deeper-in-debt-as-pension-returns-lag-target So why is an 8.5% return assumption delusional? It's pretty simply really.  Assume that your fund is 50% bonds, 50% stocks.  Currently 10-year Treasuries are yielding about 2.3%.  Let's round that up to say 3% to be generous....

Will fee cutting hurt the pension fund?

July 15, 2017 Comments (0)

In an article yesterday in the News and Observer (http://www.newsobserver.com/news/business/article161425553.html), David Ranii explores whether fee cutting by the pension fund might hurt future returns. It's a good article, I was interviewed for it, and I recommend that you read it.  I would, however, like to add a small comment/clarification with regard to my comments within the article. While I strongly support attempts by the pension fund to reduce fees, this has to be done in a...

Folwell reduces fees by $50m

June 14, 2017 Comments (0)

Some good news from the Treasurer's office.  Apparently our new Treasurer has reduced fees by $50 million so far.  He reports that he's on track to hit $200 million by the end of his first term. http://www.newsobserver.com/news/business/article155868344.html This is great news.   I am sure we will be digging into the numbers when the annual report comes out, but for now, this is a great start.

Dow hits 20,000

January 25, 2017 Comments (0)

What does this mean? Ummm. Not much.  https://www.bloomberg.com/news/articles/2017-01-25/-time-to-get-out-as-dow-milestone-a-call-for-caution-pros-say Some will say that you need to get out once a milestone is met.   Trouble is - when do you get back in?   Oh - that's right - before the market goes back up. Of course, 20,000 is no 36,000.  We're still waiting for that one.

Nevada only pays $13 Million to run its $35 Billion pension fund!

October 26, 2016 Comments (0)

A recent article in the Wall Street Journal is getting some attention - as it reports that Nevada only pays $13 million to run its $35 billion Pension Fund.  To put this in perspective; North Carolina pays 12 times as much, even after you take account of the size differences in the plan. So how does Nevada keep costs so low?   The answer is simple: the plan is indexed. Not only are the costs super low, the performance is pretty good.   Ron Elmer runs the numbers and finds that...

You can't consistently beat the market. Just ask Harvard.

October 3, 2016 Comments (0)

Harvard University has been lamenting a substantial loss in the value of their endowment.  Apparently about $2 Billion.   See:http://www.chronicle.com/article/What-a-2-Billion-Loss-Really/237965 Harvard has chased all sorts of exotic strategies, including private equity and hedge funds and yet - to quote the above article: "...if Harvard had passively invested in a standard mix of 60 percent stocks and 40 percent bonds, it would have gotten a higher rate of return — 8.9 percent over...

Money Monster - a review

September 12, 2016 Comments (0)

I just watched "Money Monster".   It's a thriller staring George Clooney and Julia Roberts that's basically a mashup of Jim Cramer meets the flash crash meets (fill in your evil corporation here). The movie is OK, if you don't know much about finance.   However, if you do happen to know a little bit about how markets actually work, you'll be cringing all the way through. The basic plot:  Clooney is a TV star (a la Cramer) who runs a stock picking show.  Roberts is his...

NC SPIN talks about Pension Fund Fees.

September 12, 2016 Comments (0)

On a recent episode of NC SPIN, the topic was pension fund fees.   I was quoted at the start of the segment.  The video is here:  The bit about the pension fund starts at 17:37. While the discussion was pretty good and I am glad to see that the fees are getting more and more attention, there were a few comments that I think need addressing. 1. John Hood talks about the idea that if everyone indexed, markets wouldn't be efficiently priced anymore.   While in theory,...

Pension Fund Fees keep on growing.

August 31, 2016 Comments (0)

Last Friday, Cullen Browder reported on the level of fees now being paid by the NC Pension Fund.   In the process, he interviewed yours truly.   The video is here: http://www.wral.com/fees-grow-faster-than-nest-egg-in-nc-employees-pension-fund/15963461/ A big thank you goes to Ron Elmer who blogged about the fees on his investorcookbooks blog. Ron compared the fund today vs. what it would have looked like had the asset allocation in 2000 been maintained using Vanguard index funds....