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

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Versum Materials (VSM), with a market capitalization of $2.7 billion, enables chipmakers to achieve higher performance at lower cost with enhanced reliability. Versum is a leading global provider of electronic materials for the integrated circuit and flat-panel display markets.