STUMP » Articles » Mornings with Meep: Gathering Info and Around the Pension-o-Sphere » 24 June 2018, 06:34

Where Stu & MP spout off about everything.

Mornings with Meep: Gathering Info and Around the Pension-o-Sphere  


24 June 2018, 06:34

Here’s the video:

If you can’t see it above, or would like to leave a comment.


Here are some of my “watch” threads at the Actuarial Outpost and a few other related threads:



Kentucky’s new pension “reform” law was struck down in court… for the method of its passage, not for its substance.

I bet even if it were procedurally okay, it would have been struck down for substance.

Quick snippet: Kentucky Politics Distilled: Pension Bill Struck Down

This week in Kentucky politics, a judge struck down Kentucky’s new pension law, saying legislators broke the law by rushing the bill to passage. Kentucky’s health secretary says the state will have to cut benefits if a federal court blocks Gov. Matt Bevin’s changes to the Medicaid system. And Democrats no longer make up a majority of registered voters in the state.

This spring, the Republican leaders of the legislature were having trouble making changes to the retirement benefits of state workers. They wanted to do that because Kentucky’s pension systems are woefully underfunded. But teachers and other state workers swarmed the state capitol and their protests effectively stymied any legislation from getting passed.

Then, near the end of the legislative session, a new version of the pension bill was unveiled and passed out of the legislature within a matter of hours.

The bill was passed by gutting a bill dealing with sewage that had already passed out of the Senate and then inserting pension language into it.

Republican lawmakers voted to waive the requirement for bills to be presented on three separate days before they can be voted on.

And that’s ultimately what Franklin County Circuit Court Judge Phillip Shepherd said was unconstitutional.
Shepherd also ruled that the bill didn’t receive enough votes to be sent to the governor’s desk. It only got 49 votes in the House of Representatives—a simple majority of members who voted, but the judge said that the bill would have needed what’s called a constitutional majority—51 votes.

So there you go — a rushed process ended up with nothing at all.

And if they manage to follow the process correctly next time, the judge can knock it down on pension protection grounds.

Other coverage:

If I were the teachers, I wouldn’t be crying victory… it’s a short-lived one. Your pensions are still grossly underfunded, and while I don’t think this bill did much of anything to help with that, having the cash continue to leave faster….. well, let me know if you think it’s a victory then.


Oh this is beautiful. The divestment/high scrutiny of politically-unpopular industries in pension portfolios is now sucking up items like drug companies, private equity leveraged buyout players, and more.

Of course it was never going to stop with tobacco companies, then energy companies, and then firearms companies, …. I’m really looking forward to the vegans making the case that meat shouldn’t be invested in.

Perhaps if one can’t help playing politics with pension funds, then the pension participants need to share the investment results. As it is, people playing with money that really belongs to somebody else (the pension participants) and expect somebody else to pay when they screw up (bondholders and taxpayers…) — yeah, that is the essence of not having any skin in the game.

I think these blowhards should have to pony up some of their own money as an option… and if they don’t have enough to cover the bet should things go wrong, then they are not allowed to make the bet.

Oh, and something about diversity.

Another thing to notice: almost all of the worst divestment drives are from states/localities with the worst funded pensions.

This is unlikely to be a crazy random happenstance.


This pulls in from Kentucky… what a surprise!

Hedge Fund Drops Kentucky Pension Fund Over Ethics Requirement

A NEW York-based hedge fund is ending a $68 million investment by the Kentucky Retirement Systems, citing new code of conduct requirements imposed by the state, as well as ongoing litigation, the system’s executive director said on Thursday.

David Eager said the decision by Davidson Kempner Capital Management was a first for the $17 billion public pension system, which has been holding discussions with investment managers about adhering to CFA Institute code of ethics and standards of professional conduct as required by a 2017 Kentucky law.

“We wanted to place more money with them. They expressed concern about the requirements of Senate Bill 2 with regards to the CFA codes,” he said in an interview, adding that the “push back” centered on the firm lacking an affiliation with the CFA Institute.

The firm declined to comment on the matter.

It should be interesting to see if there are hedge funds and private equity groups that are finding transparency requirements as being too onerous so that public pensions are no longer customers they want.

This is the first pushback I’ve seen. I do remember Calpers (or Calstrs) trying to exit one of these kinds of funds due to their own divestment requirements… and because of covenants, the fund couldn’t let them leave faster than over several years.

Of course, California didn’t try to impose these requirements on the fund.

Other pension fund governance issues:

We’ll see what happens. Maybe other funds will be willing to go along with Kentucky’s requirements.

Or perhaps other funds will follow the lead of this hedge fund.


Have a grab bag!

For that last one, I like Bury’s analysis:

8. Too late.
9. Too late.
11. Too little.
14. Too little.
16. Too little.
17. Too little.
18. Too late and too little.
19. Too late and too little.

Go to the post to see what he was responding to.

That’s all, folks!

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