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New Ways to Lose Pension Money

by George Liebmann

We return to the melancholy subject of municipal and state pensions. Last year, we noted Governor O’Malley’s actions in signing three new measures relating to investments by state pension funds: one which barred them from investing in companies with business operations in Iran or The Sudan, one which removed ceilings on the commissions of hedge fund managers, and one which institutionalized a program of ‘affirmative action’ for that enslaved and destitute class, ‘minority’ investment bankers.

Early returns are in on the results of these O’Malley Administration initiatives, all of which we must suppose to have been inspired by disinterested regard for the public interest.

1. On December 18, 2009, the Maryland Retirement Systems issued a press release proudly announcing that in compliance with the new law it had divested "more than one million shares of common stock valued at $38.3 million and $3.6 million in bonds of Royal Dutch Shell" to comply with the divestiture law. As of April 21, 2010, Royal Dutch Shell was trading at $61.55 per share and rising, and its practices in Iran remained unaltered.

2. The FY 2009 report recorded that more than $4 billion was to be invested in private equity, and that the $962 million already invested produced a negative return of 22.3% versus negative 20% for the portfolio as a whole.

3. $1.3 billion had been confided to the Terra Maria ‘Emerging Manager’ program, producing a negative return of 21.2%.

While the O’Malley administration has thus occupied itself, the Pew Center on the States has released The Trillion Dollar Gap, a study of state pension and employee retirement systems, finding Maryland’s pension system to be one of 8 states given a zero grade and one of 18 raising ‘serious concerns’ and finding it to be 78% funded with an unfunded liability of $10.9 billion, the 15th largest in the country. The state’s unfunded liability for employee health care was $14.7 billion, 13th largest in the country, its obligations were only 0.8% funded and it too raised ‘serious concerns.’


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