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Nashville pension fund leads U.S. in risky investments

Posted on 07 April 2018 by admin (0)

pensionsNashville’s public pension system invested city workers’ retirement funds in the nation’s largest share of risky, high-priced investments among its peers. After eight years, the aggressive strategy shows promise, but it’s not clear if it’s worth the risk to retirees, or the millions paid to Wall Street managers.

Since the 2008 financial crisis, Nashville’s pension managers have been shifting taxpayer money into junk bonds, hedge funds, troubled mortgages, private equity funds and other alternatives to conservative stocks and bonds. If successful, these “alternative investments” can earn greater profits, but they also demand high fees and carry the risk of heavy losses.

Nashville’s investments have shown mixed results. After taking out fees, the city’s fund grew by 4.7 percent a year since 2008, on average, while the Standard & Poors 500 gained 6.6 percent.

Pension systems across the country, looking to improve their balance sheets, have moved into this once-rarefied realm of Wall Street financiers. But Nashville stands out for its large share of so-called alternatives.

The city has placed 57 percent of its $2.8 billion fund into alternative investments, including real estate. Among its peers, Nashville had the highest share in fiscal year 2015, according a Tennessean analysis of National Association of State Retirement Administrators data for funds with $1 billion to $5 billion in assets. The national average among all public funds, by contrast, is 17 percent.

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This is an ongoing series into Nashville’s pension fund. Here are two other stories:

How much does Wall Street make from Nashville’s pension fund? Nobody knows.

Nashville pension fund paying Wall Street 40% more than previously disclosed

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