Thursday, 24 July 2014
Last updated 6 hours ago
Apr 16 2014 | 9:48am ET
American public pension funds are in bigger trouble than widely thought, according to the world's largest hedge-fund manager.
Bridgewater Associates said it has crunched the numbers, and that there's an 80% chance that public pensions will go bust within 50 years. In 20% of the scenarios tested by Bridgewater's "stress-test" model, they'll run out of money in just 20 years.
Bridgewater notes that public pensions have some $3 trillion in assets and $10 trillion in future liabilities. That means they need to return at least 9% a year to ensure that they can pay those obligations.
Unfortunately, the most optimistic of predictions have pensions earning just 7% to 8% per year, which would lead to a 20% shortfall. And Bridgewater believes those predictions are optimistic, indeed.
The hedge fund said it is more likely that public pensions will earn just 4% annually. That would see 85% of U.S. public pensions go bankrupt in the next 30 years.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…