Why should employees working in the public sector be any different than employees working in the private sector?
With the 401(k) option, the investment risk is placed on the employee rather than the company, and Wall Street knows fully well that most employees aren’t sophisticated enough to accomplish reasonable risk adjusted investment returns to accumulate sufficient funds to maintain their standard of living after retirement.
401(k) retirement savings are easy pickings for Wall Street, why should public pension funds be any different?
As an example, “if the SEC's charges are proven true beyond a reasonable doubt, it will mean Goldman Sachs was involved in one of Wall Street's biggest scandals: Failing to disclose that it allowed a hedge fund, Paulson & Co., to determine or help determine what securities were packaged in a collateralized debt obligation (CDO), giving Paulson an unfair advantage when it later shorted the poor-quality CDO,” (Joseph Lazzaro, Daily Finance, April 2010).
The report released by Stanford Institute for Economic Policy Research on April 5 said CalPERS, CalSTRS, and UCRS lost a combined $109 billion in portfolio value between June 2008 and June 2009, due in no small part to corporate corruption, accounting fraud, and poor management (AIG, GM, Lehman Brothers, etc.)
In response, CalPERS believes they can earn a higher rate of return than government bonds over the long run with an acceptable level of risk. One would expect CalPERS to be a sophisticated investor with the resources to manage assets in a way that limits volatility.
Recent studies indicate that employees find more corporate fraud than regulators. Providing CalPERS, CalSTRS, and UCRS a structured process to identify and contain risks within their equity investment portfolios will make it possible to achieve long-term sustainable risk adjusted investment returns.
In an effort to identify and contain risks within equity investment portfolios, a group of finance and accounting professionals, with first-hand knowledge of corporate fraud, have created an online forum (http://www.zethics.com) that provides employees of public and private companies a structured process to anonymously disclose information about corruption, fraud and poor management directly to investors and the public.
The website provides CalPERS, CalSTRS, and UCRS a unique opportunity to build an ethical framework to accomplish responsible ownership goals and achieve long-term sustainable risk adjusted investment returns by providing transparency into the companies they own.
The attack on retirement benefits for those who put themselves in harms way (law enforcement officers, firefighters, teachers, etc.) is completely unfounded when there are tools available today that will allow CalPERS, CalSTRS, and UCRS to achieve long-term sustainable risk adjusted investment returns.
Wall Street has managed to turn private sector employees against public sector employees, when the real issue is reigning in excesses in the boardrooms of Corporate America (Goldman Sachs, BofA, etc.).
