Bridgewater: U.S. Public Pension Funds On Road To Ruin

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.


In Depth

Royalties: The Alternative Assets of the Music Industry

Jul 8 2016 | 7:01pm ET

Recent market volatility has investors seeking greater insight into alternative...

Lifestyle

Vortic: Making Great American Watches Again

Jul 25 2016 | 6:29pm ET

If you are compelled by stories of entrepreneurial vision & drive, or simply...

Guest Contributor

MPI: Like Stellar Returns? Better Understand the Risks First

Jul 22 2016 | 8:44pm ET

When the press reports extraordinarily strong relative or risk-adjusted returns...