Planning for the Future

04.02.1211:06 AM ET

There's a Lawsuit in These Pension Funds

SACRAMENTO, CA - OCTOBER 27:  California Governor Jerry Brown announces his public employee pension reform plan October 27, 2011 at the State Capitol in Sacramento, California.  Gov. Brown proposed 12 major reforms for state and local pension systems that he claims would end abuses and reduce taypayer costs by billions of dollars.  (Photo by Max Whittaker/Getty Images)
California Governor Jerry Brown announces his public employee pension reform plan October 27, 2011 at the State Capitol in Sacramento, California. (Max Whittaker)

A legalist friend points to this story in the New York Times:

Searching for higher returns to bridge looming shortfalls, public workers’ pension funds across the country are increasingly turning to riskier investments in private equity, real estate and hedge funds.

But while their fees have soared, their returns have not. In fact, a number of retirement systems that have stuck with more traditional investments in stocks and bonds have performed better in recent years, for a fraction of the fees.

The story of the way that these pension funds are not just run…but manipulated to make it appear like they will meet their numbers (see San Diego public employees pension fund) will provide the next huge scandal and will make for 15 years worth of big-time lawsuits.