Don’t be fooled by illiquid assets
As I read Drew DeSilver’s article in last Sunday’s Times, titled “State pension plan bets big on private equity,” [Business, March 24] I wanted to scream — pensioners beware! Twenty-five percent of your pension is in alternative investments. You have got to be kidding. And the state’s chief investment manager brags “we are getting into investments other funds can’t.” Do you know why? Because those states have restrictions on investing in these pie-in-the-sky ideas.
Remember, my dear pensioners, hedge funds or alternative investments returns are self-reported. There is no regulatory authority that provides a legitimate analysis of the reported returns. Is this how you want your pension managed? Don’t you want to be assured it is there when you retire? What kind of guarantees do you have? For this portion of the portfolio — none.
In fact, Vanguard Funds did a review years ago on alternative funds that stated “often returns are overstated and volatility understated because they are invested in illiquid assets.” You can’t simply sell the stock or bond and be guaranteed a certain value based on the trade as with conventional assets.
My advice: Demand greater accountability. It is your future that Gary Brubaker and Washington State Investment Board are betting. Don’t take the path that lead to the demise of Lehman’s, Merrill Lynch and many banks because they too believed the returns of illiquid assets.
–Greg L. Sheridan, Sammamish