Retirement investments suck; at least that’s the opinion of the Legislative Research Commission (LRC).
Seven months after this blog broke the story that Kentucky Retirement Systems (KRS) and the Kentucky Teachers Retirement Systems (KTRS) combined over the last 3 years underperformed by $2 billion, the LRC came out with a report saying they underperformed by $2.9 billion. Slightly different time periods but the result is the same.
The excuses by the Executive Directors of both systems prove that they are either blatant liars or totally incompetent.
From Mark Hebert’s Blog:
The CEO's of both pension systems told lawmakers that they've been hamstrung by cash flow problems and a past ban on foreign investments.
From the Associated Press story:
Gary Harbin, executive secretary of the Kentucky Teacher's Retirement System, said the system has been limited by regulations that prevented international investments. That has since changed, and the retirement system is performing better, Harbin said.
There have never been any regulations preventing KRS or KTRS from investing internationally. This was confirmed in the 1998 review by Kentucky State Auditor that recommended both KRS and KTRS invest internationally.
This hallucination of a regulation was totally self-inflicted by their own incompetence.
From page 21 of “AN EXAMINATION OF INVESTMENTS AND INVESTMENT PRACTICES OF THE KENTUCKY RETIREMENT SYSTEMS AND THE KENTUCKY TEACHERS’ RETIREMENT SYSTEM”:
KRS and KTRS should further diversify their investment portfolios by including international holdings.
Cash flow issues have no influence whatsoever on pension investment return. This is unheard of as an excuse in other states,
So it’s your choice, are the Executive Directors of the Pension Funds idiots or liars?