Saturday, 1 August 2015
Last updated 13 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.
May 27 2015 | 2:15pm ET
Support Hedge Funds Care, also known as Help For Children (HFC), by participating in this year's raffle. All proceeds go to support HFC's mission of preventing and treating child abuse. Read more…