Category: Pension funds

Whose risk is it, anyway? Part 4, If the funding ratio falls below 80%

16 January, 2014 (09:00) | Actuaries, Bankruptcy, Bonds, Detroit, investing, Kevyn Orr, Municipal bankruptcy, municipal bonds, Pension funds, public choice theory, Risk, Speculation, US News |

By:David A. Smith   [Continued from yesterday's Part 3 and the preceding Part 1  and Part 2.]   In the three days up to this point, we’ve discovered that the City of Detroit, not its employee-retiree pension funds, owns the risk of fund underperformance, meaning we have a classic case of moral hazard combined with principal-agent risk.  […]

Whose risk is it, anyway? Part 2, Negative twelve percent return

14 January, 2014 (09:00) | Actuaries, Bankruptcy, Bonds, Detroit, investing, Kevyn Orr, Municipal bankruptcy, municipal bonds, Pension funds, public choice theory, Risk, Speculation, US News |

By:David A. Smith   [Continued from yesterday's Part 1.]   Yesterday’s post, the first of four parts in this multi-parter, finally started our blog process of explaining the arcana of pension fund investment management and its implications for failing cities and municipal bankruptcies.   Principal sources used in this post Pension and Investments (April 15, […]

Whose risk is it, anyway? Part 1, 52% of the obligations

13 January, 2014 (12:21) | Actuaries, Bankruptcy, Bonds, Detroit, investing, Kevyn Orr, Municipal bankruptcy, municipal bonds, Pension funds, public choice theory, Risk, Speculation, US News |

By:David A. Smith   Throughout my ongoing posts about municipal insolvency and municipal bankruptcies (Chicago, Detroit, Hamtramck, Harrisburg, Jefferson County, San Bernardino, Scranton, Vallejo) , two themes have dominated the liabilities side:   Firefighters gather in front of the federal courthouse protesting possible pension and public safety cuts during a Detroit bankruptcy hearing on July […]

Detroit’s sixteen cents: Part 2, Half its liabilities from retirement benefits

10 December, 2013 (09:00) | Bankruptcy, Bonds, Cities, Detroit, Municipal bankruptcy, Pension funds, public employees, Recapitalization, US News, Workouts | 2 comments

[Continued from yesterday's Part 1.]   By:David A. Smith   Yesterday we saw that Detroit’s bankruptcy judge confirmed the inescapable – the city is indeed bankrupt – and reported the testimony that the Roamin’ Empire can pay only sixteen cents on the dollar of its total liabilities (including unfunded pension liabilities to retired public employees). […]

Detroit’s sixteen cents: Part 1, So self-evident no one had to say it

9 December, 2013 (12:52) | Bankruptcy, Bonds, Cities, Detroit, Municipal bankruptcy, Pension funds, public employees, Recapitalization, US News, Workouts |

   By:David A. Smith   Sixteen cents on the dollar.   One buck out of six.   That is what every creditor of beleaguered and bankrupt Detroit will get, on average, when Kevyn Orr’s plan of reorganization is eventually confirmed, as it will be.    Oh, there will be weeping and wailing and gnashing of […]