Any other deep thoughts to share on this cold December morning?
- Posted by Rich Miller
- Don't Worry, Be Happy - Wednesday, Dec 18, 13 @ 8:45 am:
Tom’s right - let’s take a hammer to the pension fund managers. After all, if they’d been as good generating returns for the pension funds as they are generating returns for themselves, our pension funds would be overfunded by now.
Put them on an incentive plan. For average returns (compared to the industry average), they don’t get paid any fees. Zero, zip, nada. For better than average, give them a percentage. That’s pure capitalism … rewards for results.
I’m not sure if this tweet was snark or not, but many government agencies have policies in place that require a periodic rotation of investment advisors, fund managers, auditors, etc. The purpose is to make sure that the relationship doesn’t get too cozy and that fresh perspective is injected into the process every so often. It’s a meritorious idea.
- Small Town Liberal - Wednesday, Dec 18, 13 @ 9:08 am:
Maybe we can just bypass them and go into the private equity business. That’s where the money is, right?
Right on Thomas C. Bowen. Most intelligent thing I’ve seen on here in weeks.
And not only term limits for pension fund managers like Bruce Rauner, but let’s really take a sledgehammer to their compensation. Just pay him what the average state worker makes and give him a 401K. After all, how hard can it be to invest money for a pension fund? They are very limited to very safe investments and strategies, as they should be.
- Give Me A Break - Wednesday, Dec 18, 13 @ 9:16 am:
Deep Thought For The Day: For the Love of Pete, the House is doing a hearing today. Does anyone really think the media or the public are paying attention to them a week before Christmas?
What were the returns the Rauner firm made for the pension funds? The tweet is silly, without knowing that info. If the returns outperformed the market indexes, why would anyone want to change firms. If the returns underperformed the market indexes, why weren’t the politicians asking questions?
This looks like what’s referred to as a “drive by” tweet to me. You’re not stuck with any of them for government mandated terms. You get to move the money to the better performers. Their fees are pretty standard from place to place. It’s the performance that counts. I’m not sure what this guy’s point is.
I always thought the State’s money woes were the result of the officers watching the money are not required to be experts in that particular field. For example, the State Treasurer was never a true banker/finance/MBA; the Comptroller has never been a CPA; and the Auditor General does not have a CPA/CIA background. Naysayers will say that their staff does, but the problem is that the boss overrules his staff.
- Chicago Cynic - Wednesday, Dec 18, 13 @ 10:00 am:
Oh cmon. If you’ve got an investment firm turning in consistently strong returns, it would be idiotic to get rid of them. Clearly, bad firms should be dumped, but it’s hard to evaluate given that a venture or PE fund returns get judged in the long run, not the short run. You wouldn’t want a firm that just focuses on short term flips and not long term value.
“If the Elected Officials outperformed their Colleagues, why would anyone want to change Elected Officials. If the Elected Officials underperformed their Colleagues, why weren’t the Voters asking questions and being active?”
To that, shouldn’t we all be judged on performance, and not dictated as to how long you are “useful” and let the Free Market decide?
Otherwise, why have elections, just have 8 year terms with no chance at Re-election?
Term limits are questionable, and would not solve the problem Soccertease @ 9:58 raises. We have way too many elected officials, including judges. It results in undue partisan influences in elections for positions that require objective competence.
There is just no way the vast majority of voters can make rational decisions about who to vote for, unless they were retired. Party affiliation means little in todays changed world, where big campaign money controls the course of elections. Most positions like the ones Soccertease mentions should be selected by bipartisan commissions on the basis of specific criteria and qualifications.
Illinois really needs reform in the election process. We need to lower the boom on these kinds of systemic flaws that invite excessive corruption.
Actually, there needs to be a regular review of the performance and fees. Bid the work at least every other year.
Let the financiers engage ‘in a race to the bottom’ as far as their fees go. I bet we can find someone hungry to do the work for 20% less than what is currently paid.
Of course that means the folks in charge have the gumption to rock the boat against their bosses wishes…..
- Walter Mitty - Wednesday, Dec 18, 13 @ 10:34 am:
Again, tear down success. If he was successful, there should be a correlation to the funds being successful. If there is no direct correlation, that’s not his fault. Like my kid’s when they lose a game. Do better..Don’t ever blame the ref. The only blame is the elected officials that hired them period. Free market. One should ask the author, if you were going in for surgery, the best surgeon, or the C student who’s “turn” it is? Hypocrisy on anyone that can say otherwise. Or do you want 1% returns on the “magic” plan to save the pensions? Sorry. Cranky. Cheap shot. No different than thinking an $18 watch makes you common…
=“If the Elected Officials outperformed their Colleagues, why would anyone want to change Elected Officials. If the Elected Officials underperformed their Colleagues, why weren’t the Voters asking questions and being active?”=
That is about as silly, as the tweet. There is no comparison.
Here’s a deep thought… I noted CME trading volume earlier this week was over 11,000,000. What if there was a 10c fee on each trade executed? Limit it to institutional trades. The big boys wouldn’t notice/care and it might be a tidy revenue stream. How about that Bruce?
I was thinking the same thing. Should there be term limits on hedge fund managers making millions off the state pension systems ? Why only elected officals ? I guess multi-millionaires that are “much smarter” than the rest of us should be exempt from such consideration. In reality, elected or private sector, these guys like Rauner are all insiders that find ways to enrich themselves at the taxpayers expense. Maybe there should be a time limit on the amount of time multi-millionaires that made their fortunes bilking the taxpayers should be allowed to keep the money.
“What if we put term limits on pension fund and money managers like Bruce’s old firm? Same principle applies: shake things up right?”
I think Rep. Fortner proposed this very idea in a post last year…
- CollegeStudent - Wednesday, Dec 18, 13 @ 10:41 am:
=Who looks at their own portfolio and says, “Gee, it’s doing quite well, but it’s time to shake things up a bit!”????=
I suspect it’s more common than you think. Although typically the investors try to shake things up at the company they are invested in. It’s not enough for a company to simply show a profit in today’s investment climate-the profit has to continually grow as well.
The reason I said that is because the concept is where I believe Mr. Rauner would be inconsistent (or maybe not! Ask him reporters). The point of term limits isn’t to remove bad politicians, it’s to devolve power away from incumbents thereby neutralizing the incumbency advantage and spreading around the burden of lawmaking to more people.
The same concept should be kosher then to professional managers, CEO’s, businesses, contract holders, etc if he was intellectually consistent.
An “incumbent” is always going to enjoy an advantage. First mover principle, experience, relationships, name/brand recognition, etc. Bruce doesn’t believe that the “little guy” has enough to topple those things in the political realm, so I think he should bring his wonderful innovation to all parts of government and the private sector.
Longstanding relationship? Good work product? Innovative approach? Not worth keeping those because of the risk of calcification and the eventual lackadaisical approach to business, government, etc. Better to make it that you only get to have things for a short period of time to foster more innovation, turnover, and activity in the economy/government.
Dare I say, this is a very socialistic notion. Spread around the “wealth” of opportunity.
What a coincidence that switching to a DC plan would result in Mr. Shake and Bake and his buddies making even more money off of the working public employees that he loves to demonize. What a piece of work.
Pension funds should be in total stock market index funds. No mgmnt required, extremely low fees.
- Walter Mitty - Wednesday, Dec 18, 13 @ 11:10 am:
switching to a DC plan would result in Mr. Shake and Bake and his buddies making even more money off of the working public employees that he loves to demonize.
And save the state in the process. I don’t know if many of us agree. But with all the ad’s… Ask your neighbors if they would like our state to be able to have a substantial change? My guess is absolutely. The message resonates. How many folks have a defined benefit retirement plan not in government? Getting it implemented and passed, is not all that relevant when your’s is the only voice… I keep saying, we may not like him. But he’s acting like the front runner.
“The major problem with term limits is it leaves the next level down, the aides and lobbyists, in de facto control of things”
This is one valid way of looking at things.
However, there is also validity to the argument that long term relationships between certain powerful, crafty politicians and certain entrenched special interests can create unsavory situations which are not in the best interests of the entire state.
As in many things in life, the concept of term limits is a complicated situation, regarding whether or not it would augment good government.
Would Illinois be better off if someone like Madigan was never able to garner so much power and control?
If term limits were enacted, would a lobbyist be able to get that much power? Doubt it.
=== However, there is also validity to the argument that long term relationships between certain powerful, crafty politicians and certain entrenched special interests can create unsavory situations which are not in the best interests of the entire state. ===
Like Rahm Emanuel, Bruce Rauner and interests like, oh, say, the Noble Network charter schools?
- Arthur Andersen - Wednesday, Dec 18, 13 @ 2:05 pm:
Don’t feed the trolls, Especially on the Tweeters.
In point of fact, all the stock and bond managers used by the Illinois pensions are “at will” and can be terminated without cause at any time. They are routinely changed if they aren’t performing or if their style of investing has fallen out of favor. To word’s point,index funds are a significant component in their portfolios as well.
The private equity, hedge fund, and other private market investments are in a sense term limited because the funds have a more or less fixed life. The investor can choose not to reinvest when the investment firm raises their next fund.
However, to terminate any investment on a fixed date for reasons unrelated to its performance or organizationl concerns is absolutely foolish.
The discussion of investing all pesnion assets in stock index funds is beyond the scope of this post, but that’s another bad idea. See countryboy’s post above.
Can’t I just tweak those responding a little more, so I can hear about the term limits? lol
- Arthur Andersen - Wednesday, Dec 18, 13 @ 2:14 pm:
RNUG, forgot to say that a number of stock/bond managers are on a performance fee basis with a low base fee and no real payday unless they beat the performance benchmark.
word, the last time I checked (and it’s been a couple years) all the IL pension funds held Illinois bonds. One thing to remember about that 2 and 20 or 1.5 and 15 fee structure is that the general partner never gets a taste of the “20″ until the limited partners have earned a “hurdle rate” of 7-8% on their full investment, then the profit sharing kicks in, 80-20.
- Arthur Andersen - Wednesday, Dec 18, 13 @ 2:15 pm:
Willy, fire away. Least I can do after yesterday lol. AA
- Yellow Dog Democrat - Wednesday, Dec 18, 13 @ 2:21 pm:
It is fashionavle to bemoan the smallness of our elected leaders compared to the size of the challenges we face,
I bemoan the fact that while the greatest leaders are humble women and men who credit others for their success and look in the mirror when asking what went wrong, the electorate often rewards candidates who claim the lionshare of any success and are quickest to point the finger at others when things go awry.
Until voters are willing to accept responsibility for errant choices and commit to making wiser ones, systemic change is wholly unlikely.
–If it was good enough for Ronald Reagan, it’s good enough for me! lol–
Reagan voted for his role model, FDR, four times.
If Reagan could have run in 1988, he likely would have won all 50 states (he won 49, including Massachusetts, in 1984).
Downstater, what was the good reason again for the 22nd Amendment? Why weren’t the people allowed that choice?
And what is it any of yours, or my, business, to tell citizens what other qualified citizens they can vote for? And what’s the good reason of removing the right of running for office for some qualified citizens?
The good people of South Carolina sent Strom Thurmond to the Senate for 49 years. He would not have been my choice if I lived there, but that’s democracy.
I have missed you. Honestly, I am trying to help the “3″, and I hope your Crew is getting that Field Organization set. Winning it in the Precincts never was more important, even more important than 2010.
Days are burning, my friend.
- Just The Way It Is One - Wednesday, Dec 18, 13 @ 7:48 pm:
There ya go Thomas Bowen. Sounds good to me. After all, who says the Rich should ALways get richer?! Let’s bring out the Sledgehammer, shall we?! Oh, and another thing–if he was to read your suggestion, I’m sure Jack Handy would be proud…!
AA, thanks for bringing the brains to the discussion on investment managers.
You’re the biggest of big hitters when it comes to those who want to get their learn on.
I committed to Soccermom for Commenter of the Year a few days ago, and she, in true Illinois fashion, immediately offered to get me loaded at Marion Street Something-Something Market in Oak Park.
I live in Oak Park, but I’m more of a Forest Park kind of guy when it comes to taverns.
But Soccermom, you’re still on the hook for your corrupt, pay-to-play, quid-pro-quo, hocus-pocus-animosus Willie-Lump-Lump corruption (that’s my tribute to Harold; the dude could ball when it came to dialogue).
See, AA, Soccermom knows how to roll; after the fact. Rod wouldn’t be going gray out in Colorado if he had her game.