Over the last 50 years public pensions have gone from negligible equity exposure to averaging over 65% equity exposure with another 10% in alternative investments and only 25% remaining in bonds before the latest down turn.
This is going to hit the states and municipalities the hardest over the next 20 years. Be very careful with long dated municipal bonds and municipal pensions. It will be important to watch the first bankruptcies of smaller municipalities to see how pensions and bond holders are treated and how the case law develops. Vallejo, CA is in the vanguard, having declared bankruptcy and successfully reduced its pension obligations (in initial court ruling anyway).
Source: A Giant Experiment?
Pensions Dramatically Increased Risk Over 50 Years
Over the last 50 years public pensions have gone from negligible equity exposure to averaging over 65% equity exposure with another 10% in alternative investments and only 25% remaining in bonds before the latest down turn.
This is going to hit the states and municipalities the hardest over the next 20 years. Be very careful with long dated municipal bonds and municipal pensions. It will be important to watch the first bankruptcies of smaller municipalities to see how pensions and bond holders are treated and how the case law develops. Vallejo, CA is in the vanguard, having declared bankruptcy and successfully reduced its pension obligations (in initial court ruling anyway).
Source: A Giant Experiment?
This entry was posted by David on April 8, 2009 at 8:44 am, and is filed under Commentary. Follow any responses to this post through RSS 2.0.You can leave a response or trackback from your own site.