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Old 08-07-2016, 12:39 PM   #21
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I've got it! Emerging markets!!!
many public systems are heavily invested in ex-us securities
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Actuaries Quash Paper on Endangered Public Pensions
Old 08-07-2016, 02:18 PM   #22
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Actuaries Quash Paper on Endangered Public Pensions

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A difficult job no doubt.



What better use of mathematical/analytical skills other than to work for the financial security of the general population?

I agree, but I did the same thing as a casualty actuary. Career opportunities for pension actuaries are dwindling.

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many public systems are heavily invested in ex-us securities
They belong in most portfolios but in moderation. "Heavily" might be a bit too aggressive for a pension fund.
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Old 08-07-2016, 02:25 PM   #23
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I agree, but I did the same thing as a casualty actuary. Career opportunities for pension actuaries are dwindling.



They belong in most portfolios but in moderation. "Heavily" might be a bit too aggressive for a pension fund.
by "heavily" I mean maybe 10 to 20 percent
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Old 08-07-2016, 02:26 PM   #24
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I agree, but I did the same thing as a casualty actuary. Career opportunities for pension actuaries are dwindling.

definitely not the "golden era" of the 80s-90s
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Old 08-07-2016, 08:48 PM   #25
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I became a bit more educated in pension funding once I got close to receiving mine. Most pensioners probably have little understanding of the mechanics behind it all. From a learning standpoint it is very fascinating ALL the assumptions that have to go into determining a funding of a system, not just the assumed yearly rate of return.
Our system acknowledged recently they had to change the life expectancy to a higher age. Them darn women are living too long is basically the problem with ours. We tend to overcomplicate simple problems.....Just make women work 5 years longer than men and then the problem goes away!


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Old 08-08-2016, 02:28 PM   #26
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We tend to overcomplicate simple problems.....Just make women work 5 years longer than men and then the problem goes away!
Sounds perfectly reasonable to me, but then again I'm male.

As soon as they stop sputtering in outrage I'm sure a few females will have a different perspective....
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Old 08-10-2016, 03:54 AM   #27
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you have several holes in your analysis:

https://www.ssa.gov/oact/tr/2016/tr2016.pdf

You should also read ASOP 27, which discusses selecting economic actuarial assumptions for pension plans.
Can you help me out with pointing out where the financial return projection assumptions are we're discussing? The report is 272 pages


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Inflation - SS trustees use 2 to 3.2% in their projections. Your 2% assumption is on the low end. You may want to consider looking at the historical mean and sd for inflation over the last 100 years or so. Who knows what inflation will be 30 40 or 50 years from now? Its never been 2% over the long term.
History is not that relevant here since the Fed has only relatively recently begun with targeting a specific inflation number: 2%.
https://en.wikipedia.org/wiki/Inflat...#United_States

Assuming the Federal Reserve will not achieve its own goals is a pretty bold statement from a pension fund, and cannot be the prudent number to be used in a mainline scenario.

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Expenses - many US public sector pension plans have TOTAL expenses less than 50 bips, most of which are investment-related for active management.
https://www.bogleheads.org/wiki/US_p...nd_performance

Mentions the average in the US is 0.55% as active asset class allocation is up recently. CalPERS as an example had a TER of 1.7% in 2012 CalPERS: “opaquely transparent”, pays more on fees | Top1000Funds.com

I had a range of 0.5% to 1.5%: let's shift it a bit to 0.25% - 1.25%. That won't make a big dent in the outcome.

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So getting 8% isn't that unrealistic, IMO, if you start with a 3% inflation assumption and have a 5% net real ROR target.
It wasn't historically, and that's where the 8% comes from, and why it still is what it is. Call it recency bias and inertia.

Over a total asset mix in the current financial environment, it is, and predictably so.

It might still happen, but it's not prudently estimated. And a pension fund not acting prudently and maintaining expectations not in line with current financial reality, is in my view fraudulent.

Banks have been convicted of deception in the past for doing stuff like this, despite disclaimers of "results obtained in the past aren't indicative of the future".
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Old 08-10-2016, 04:04 AM   #28
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I've got it! Emerging markets!!!
The Chinese: not only are they keeping the world economy growing, keep real estate well-valued in big cities, drive tourism and do they make all our stuff, now they'll also save our pensions.

Love those altruistic hard-working eastern folks.

On behalf of all us Westerners: Xiexie.
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