Via CBS Money Watch
---------------------------------------------------------------------------------------------------------
Pension funds across the country face massive deficits, estimated to be as much as $3 trillion. In an attempt to cover these deficits and keep their promises to retirees, many pension plans have dramatically increased their allocations to alternative investments. According to Wilshire Trust Universe Comparison Service, retirement systems with at least $1 billion in assets had raised their stake in real estate, private equity, and hedge funds from 10.7 percent in 2007 to 18.3 percent by the end of 2011.
---------------------------------------------------------------------------------------------------------
This is classic behavioral finance. People tend to increase their risk taking appetites when they are in the "realm of losses", a term from prospect theory, and may only serve to exacerbate the funding shortfall.
---------------------------------------------------------------------------------------------------------
Pension funds across the country face massive deficits, estimated to be as much as $3 trillion. In an attempt to cover these deficits and keep their promises to retirees, many pension plans have dramatically increased their allocations to alternative investments. According to Wilshire Trust Universe Comparison Service, retirement systems with at least $1 billion in assets had raised their stake in real estate, private equity, and hedge funds from 10.7 percent in 2007 to 18.3 percent by the end of 2011.
---------------------------------------------------------------------------------------------------------
This is classic behavioral finance. People tend to increase their risk taking appetites when they are in the "realm of losses", a term from prospect theory, and may only serve to exacerbate the funding shortfall.
No comments:
Post a Comment