Risk and OPM

Managing other people’s money (OPM) should reflect a level of responsibility that far exceeds the degree of risk an advisor may find acceptable for personal funds.

Recent media reports suggest that some public pension funds, that manage public workers’ retirement savings, have been committing funds to cryptocurrency. Apparently this has not gone well.

The management of employee pension funds is an awesome responsibility and should be conducted in a manner that provides security to participants during their retirement.  Excessive speculation, aggressive strategies to meet unrealistic benefit promises and the pursuit of political agendas should be avoided.

Public and private pension funds are treated differently in a number of ways. Perhaps the most important, is the responsibility for benefit shortfalls. This is not a new problem.  The Employment Retirement Income Security Act (ERISA) of 1974 was enacted to protect the interests of employer benefit plan participants.

Investors should be aware of companies with excessive pension and healthcare plan underfunding.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA