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    Entries in investing (7)

    Friday
    Jan132017

    The Week in Public Finance: Trump's Infrastructure Plan, Risky Pensions and NYC's Surprising Fiscal Health

    A roundup of money (and other) news governments can use.
    BY  JANUARY 13, 2017

    How Will Trump's Infrastructure Plan Affect the Economy?

    Economic impact estimates are all over the map when it comes to how much of an affect President-elect Donald Trump’s 10-year $1 trillion infrastructure proposal will have on the economy. To that end, two reports came out this week that come to completely different conclusions.

    The first, by Georgetown University, says that Trump's plan could create as many as 11 million jobs. However, it cautions, the additional spending in combination with proposed tax cuts and other economic policy shifts could “overheat the economy” by increasing inflation and setting the stage for further interest rate hikes.

    The Tax Foundation had a much more modest take. This is partly because the report assessed the varying degrees of economic impact the proposal would have depending on what other policy measures are implemented. The foundation looked at the impact of a theoretical $500 billion investment by the federal government through five funding mechanisms: borrowing, cutting government spending, raising excise taxes, raising the top tax rate on individual income and raising the corporate income tax.

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    Friday
    Nov182016

    The Week in Public Finance: Trump's Impact on Muni Bonds, Panning Social Investing and More

    BY  NOVEMBER 18, 2016

    2 Takes on Trump's Impact on Muni Bonds

     President-elect Donald Trump’s proposed policies could partially change the landscape of the municipal bond market for investors in two primary ways.

    First, his election could put Build America Bonds (BABs) -- or a program like it -- back on the table for government issuers. BABs were introduced in 2009 and 2010 by the Obama administration as a way to stimulate the economy and create jobs. Republicans on Capitol Hill killed the program, but Trump has spoken favorably about it. He's interested in stimulating more investment in infrastructure.

    Unlike regular municipal bonds, BABs aren’t tax exempt, making them more appealing to investors such as international bondholders or institutional investors who aren’t eligible to claim an exemption. Thus, they broaden the municipal bond market.

    Second, an analysis by the Court Street Group Research (CSGR) says Trump’s income tax plan could affect the municipal market because it would eliminate or reduce the tax exemption for municipal bondholders. “The CSGR approaches the reality of a Trump administration with some trepidation as it applies to municipal bonds,” the analysis said.

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    Wednesday
    Aug032016

    Public Pensions Facing Worst Returns Since Recession

    A volatile stock market over the past year has taken a toll on public pension assets.
    BY  AUGUST 3, 2016

    Public pension plans are reporting dismal investment returns this year, a development that will likely mean governments will have to pony up more money in the coming years.

    So far, no major pension plan has reported a preliminary annual investment return of more than 1.5 percent. That's thanks to a volatile stock market that's seen wild swings spurred mainly by political and economic events abroad. Some smaller plans, such as the New Mexico Educational Retirement Board, have reported earnings as high as 2.6 percent. Still for many, this year marked their worst earnings year since the Great Recession.

    The slim earnings for fiscal 2016, which ended June 30 for most plans, is well below the average earnings target of about 7.5 percent. It also marks the second year in a row that plans have missed the assumed rate of return: Most reported an investment gain between 2 percent and 4 percent in fiscal 2015.

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    Friday
    Jun172016

    The Week in Public Finance: Defending Wall Street Fees, Ranking Property Tax Rates and More

    A roundup of money (and other) news governments can use.
    BY  JUNE 17, 2016

    Defending Wall Street Fees

    The performance fees that public pension plans pay private equity and hedge fund managers are coming under scrutiny. Some say the high fees aren’t worth the returns on investment and complain that many costs remain hidden. Those two points were part of a critical report last month by the right-leaning Maryland Public Policy Institute on Maryland’s hidden Wall Street fees.

    Now, the Maryland State Retirement Agency has issued a lengthy response questioning the institute’s conclusions. In a letter published this month by Executive Director R. Dean Kenderdine and Chief Investment Officer Andrew C. Palmer, the system’s officials attack the institute’s methodology while defending its own financials.

    Maryland reported paying $85 million in performance fees in 2014, but according to the report it may have actually paid more than $250 million. The policy institute made that estimate by comparing Maryland’s disclosed performance fee rate against the rate of performance fees disclosed by New Jersey, which has a similarly sized alternative investment portfolio and fairly comprehensive fee disclosure policy.

    But Kenderdine and Palmer say Maryland's $85 million in reported fees are accurate because New Jersey has been “much more aggressive in its pacing of investments.” In other words, the private equity funds New Jersey invests in are designed to start producing returns soon after the pension puts money in the fund. Maryland’s private equity funds, however, haven’t hit that so-called harvesting period when investments are sold and managers receive performance fees from that profit, said Kenderdine and Palmer. So the performance fees are smaller but could theoretically be larger in the coming years.

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    Tuesday
    May242016

    The Hidden Wall Street Fees That Could Be Costing Pensions $20 Billion a Year

    A new report says the fees pension plans pay private equity and hedge fund managers aren't worth it.
    BY  MAY 24, 2016

    The fees public pension plans pay Wall Street money managers -- some of which go unreported -- have come under increasing scrutiny in recent years. It's estimated that disclosed and undisclosed fees cost public plans upwards of $20 billion annually, according to the author of a new study.

    That's a big dollar amount when you consider that public pension plans' collective unfunded liability is a little over $1 trillion. So far, just a few state plans have been trying to get a handle on these fees. One of them, the California Public Employees Retirement System (CalPERS), reported late last year that it paid $3.4 billion in undisclosed fees over the past 25 years on $24 billion in total investment earnings. CalPERS is the nation's largest retirement system.

    Jeff Hooke, a consultant for the right-leaning Maryland Public Policy Institute, estimates in the study that Maryland's public employees' plan paid $500 million in 2014 -- twice as much as it reported for that year. Hooke said that if other states' hidden fees are similarly underreported, the total fees pensions actually pay could be as much as $20 billion annually. "And that's just for states -- forget about all the counties and cities," he said, "which could easily add another 25 percent to that."

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