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There is a slight difference between Pension Funds and 401Ks - but not a lot. This article talks about fund managers choosing certain investments in order to get something for themselves in return. Here is a snippet from the PBS article:
The second thing that we’ve found is there’s clear self-dealing on the part of some employers. And by that I mean using the employees’ retirement assets to benefit themselves. For example, in the case of [power and automation technology company] ABB, the company was using Fidelity not only for their record keeping and their 401(k) plan, but also for their own record keeping for their payroll processing, their health and welfare plan, their pension plan for executives. It turned out, and the judge found, that those corporate services paid for by the company were being provided at a loss by Fidelity, while the 401(k) plan, where services are paid for by the employees, Fidelity was making a 51 percent profit. Meaning, as the judge found, that the employees were subsidizing corporate expenses with their own assets. And that’s absolutely illegal.
There is a lot more information out there about this topic, I just did one quick search.
There is a slight difference between Pension Funds and 401Ks - but not a lot. This article talks about fund managers choosing certain investments in order to get something for themselves in return. Here is a snippet from the PBS article:
The second thing that we’ve found is there’s clear self-dealing on the part of some employers. And by that I mean using the employees’ retirement assets to benefit themselves. For example, in the case of [power and automation technology company] ABB, the company was using Fidelity not only for their record keeping and their 401(k) plan, but also for their own record keeping for their payroll processing, their health and welfare plan, their pension plan for executives. It turned out, and the judge found, that those corporate services paid for by the company were being provided at a loss by Fidelity, while the 401(k) plan, where services are paid for by the employees, Fidelity was making a 51 percent profit. Meaning, as the judge found, that the employees were subsidizing corporate expenses with their own assets. And that’s absolutely illegal.
There is a lot more information out there about this topic, I just did one quick search.
And this is the same Fidelity that recently fired 200 employees for abusing coupons on home-fitness equipment (there was quite a contentious thread on this topic). Cheating by the Outer Party is a perfidious crime. Cheating by the Inner Party is a higher form of wisdom.
There is a slight difference between Pension Funds and 401Ks - but not a lot. This article talks about fund managers choosing certain investments in order to get something for themselves in return. Here is a snippet from the PBS article:
The second thing that we’ve found is there’s clear self-dealing on the part of some employers. And by that I mean using the employees’ retirement assets to benefit themselves. For example, in the case of [power and automation technology company] ABB, the company was using Fidelity not only for their record keeping and their 401(k) plan, but also for their own record keeping for their payroll processing, their health and welfare plan, their pension plan for executives. It turned out, and the judge found, that those corporate services paid for by the company were being provided at a loss by Fidelity, while the 401(k) plan, where services are paid for by the employees, Fidelity was making a 51 percent profit. Meaning, as the judge found, that the employees were subsidizing corporate expenses with their own assets. And that’s absolutely illegal.
There is a lot more information out there about this topic, I just did one quick search.
My employer invited someone in to "educate us" about how to invest in 401K funds. He was pushing all of us hard into the highest fee funds that have a manager that then picks and holds several other funds with their other fees. I tried to get him to answer if the fees advertised just go to the manager picking the funds, but don't account for those funds within funds fees and he blew me off.
He also discouraged people from doing index funds (read low-cost funds) and gave a convoluted reason as to why.
So it isn't shocking that they can have a 51% profit margin on the services that offer when people get steered into ~1.5% fees.
Back to pensions, I once belonged to one that had about a 2% management fee...that the manager was pulling to underperform the S&P 500 index.
Last edited by michiganmoon; 07-12-2018 at 04:17 PM..
Average pension fund allocation is 46/27/27 for equities. bonds, and others including cash, hedge funds, private equity, commodities, real estate, and so on. The last category is fairly recent. It also occurred during a market environment where bonds and commodities often rose in tandem with equities with only a few periods of negative correlation.
Pension funds generally can't invest 100 percent in stocks so the comparison with a simple index fund is not valid.
like any statistic things get skewed and molded to make whatever point someone wants to make .
we saw a commercial about driving under the influence. they said 40% of all accidents involve drugs or drinking . i said to my wife , see it is safer to drive stoned , the other 60% of accidents involve straight people
Average pension fund allocation is 46/27/27 for equities. bonds, and others including cash, hedge funds, private equity, commodities, real estate, and so on. The last category is fairly recent. It also occurred during a market environment where bonds and commodities often rose in tandem with equities with only a few periods of negative correlation.
The article claims that the 3rd category of alternative investments has increased in large part due to pension managers missing their promises and are looking for ways to make up the gap.
Quote:
Originally Posted by lchoro
Pension funds generally can't invest 100 percent in stocks so the comparison with a simple index fund is not valid.
That is fair.
But it is also fair to criticize that some of these funds are managed by somebody taking a 2% management fee every year and pick funds that have their own additional fees, which adds up to be a lot and then can't even beat a 60/40 stock index/bond index fund over the long-term.
I'll gladly manage these funds for a 0.01% management fee, pick a few Vanguard funds and likely beat the current managers.
-Charge high fees that most workers don't realize exist
-Underperform a simple index fund or a simple 60% stock/40% bond fund
-Promised big returns that they aren't getting
-Are managing pensions that were underfunded to begin with so they are investing in alternative funds, which has thus far made the underfunding worse
Because the pension funds are mismanaged...it has cost US taxpayers $600,000,000.00 to over $1,000,000,000,000.00 across the country as governments have had to put more money into them to compensate for the workers retirement promises, which won't be met unless money is diverted away from other areas to prop up the pensions.
There is almost no chance of beating the larger indices such as the Total Stock Market Index or S&P. All they would have to do is invest in one of these and they'd be fine, but they are totally mismanaged because everyone takes a piece of the pie. Plus, there's almost zero chance of beating the market in the long run. Its VERY DISGUSTING AND SEEMS TO ME TO BE CRIMINAL.
of course you can beat the total market over time . three of my fidelity funds i have owned over time have done it over just about every time frame.
you can do it quite easily , especially with portfolio's which are not dependent on any fund beating an index yet the combination of assets do . the insight growth model as an example has beaten a total market fund for 30 years now . each fund is used through it's sweet spot and then traded for a better choice when the bigger picture changes .
the fidelity insight sector model has beaten the pants off a total market fund for decades now.
it is a lot easier to do well when a portfolio is involved because unlike individual funds , portfolio's have no restrictions or fund objectives to stay within .
Last edited by mathjak107; 07-13-2018 at 12:53 PM..
of course you can beat the total market over time . three of my fidelity funds i have owned over time have done it over just about every time frame.
you can do it quite easily , especially with portfolio's which are not dependent on any fund beating an index yet the combination of assets do . the insight growth model as an example has beaten a total market fund for 30 years now . each fund is used through it's sweet spot and then traded for a better choice when the bigger picture changes .
the fidelity insight sector model has beaten the pants off a total market fund for decades now.
it is a lot easier to do well when a portfolio is involved because unlike individual funds , portfolio's have no restrictions or fund objectives to stay within .
Find me a major pension fund that has beaten the broader indices or come close over the past 30 years. I don't think there are any. I should have restricted my response to major pension funds. Net of fees and expenses I'm not aware of any.
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