{"id":30974,"date":"2018-02-13T18:28:37","date_gmt":"2018-02-13T23:28:37","guid":{"rendered":"http:\/\/olduvai.ca\/?p=30974"},"modified":"2018-02-13T18:29:11","modified_gmt":"2018-02-13T23:29:11","slug":"1-2-trillion-asset-manager-forget-volatility-the-real-financial-timebomb-is-public-pensions","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=30974","title":{"rendered":"$1.2 Trillion Asset Manager: Forget Volatility, The Real Financial Timebomb Is Public Pensions"},"content":{"rendered":"
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$1.2 Trillion Asset Manager: Forget Volatility, The Real Financial Timebomb Is Public Pensions<\/a><\/span><\/h3>\n<\/div>\n
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As we have reported\u00a0over<\/a> and over<\/a> and over<\/a>\u00a0(and over<\/a>, and over<\/a>), public pensions\u00a0are in deep, deep trouble.<\/p>\n

In addition\u00a0critical funding shortfalls (U.S. public pensions had just 71.8% of assets required to meet obligations as of June 2016<\/a>), many of the country’s largest pensions\u00a0have completely unrealistic target rates-of-return of 7% on average.<\/p>\n

(Millman 2017 Public Pension Funding Study<\/a>)<\/em><\/figcaption><\/figure>\n

And while interest rates and therefore the cost of leverage\u00a0has\u00a0been at historic lows, and markets at historic highs (until they underwent a brief Vol-fib cardiac arrest last week), the question is what happens when the music stops, liquidity dries up, and\u00a0economic contraction besets (or catch up to) the markets?<\/p>\n

David Hunt, CEO of $1.2 trillion asset manager PGIM, is asking this exact question.<\/p>\n

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“If you were going to look for what\u2019s the possible real crack in the financial architecture for the next crisis, rather than looking in the rearview mirror, pension funds would be on our list,\u201d <\/strong>Hunt said in a Friday\u00a0interview with Bloomberg<\/a>, discussing what municipalities and states will do when\u00a0local tax revenues decline and unemployment worsens.\u00a0<\/strong>“So we’re\u00a0worried about those pension obligations<\/strong>.\u201d<\/p>\n

PGIM, owned by New Jersey-based Prudential Financial, advises 147 of the 300 largest pension funds around the world.<\/strong> Hunt joined Prudential in 2011 after leaving McKinsey & Co., where he doubled assets under management, renamed the business PGIM, and bought a Deutsche Bank AG unit to expand in India.<\/p>\n

In other words, he knows the business like the back of his hand.<\/p>\n

Hunt said that corporate retirement funds typically outperform their public counterparts. To that end, one of the most difficult aspects of managing money for public plans, says Hunt, is the fact that lawmakers are promising unrealistic goals to retirees.\u00a0<\/strong><\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

$1.2 Trillion Asset Manager: Forget Volatility, The Real Financial Timebomb Is Public Pensions As we have reported\u00a0over and over and over\u00a0(and over, and over), public pensions\u00a0are in deep, deep trouble. In addition\u00a0critical funding shortfalls (U.S. public pensions had just 71.8% of assets required to meet obligations as of June 2016), many of the country’s largest […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[18547,18546,7383,18544,827,18545,2773,4318],"class_list":["post-30974","post","type-post","status-publish","format-standard","hentry","category-economics","tag-david-hunt","tag-financial-timebomb","tag-public-pensions","tag-underfunding","tag-united-states","tag-us-public-pension","tag-volatility","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30974","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=30974"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30974\/revisions"}],"predecessor-version":[{"id":30976,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30974\/revisions\/30976"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}