Ready. Set. Go.
Warren Buffett is a fan of saying “Never invest in a business you can’t understand.” Great rule to live by in the investment world, no? Especially when it comes to major pension systems? Haha, naw, this is Kentucky. Let’s snap back to reality.
Kentucky Retirement Systems seems to be attracted to complex investment disaster after complex investment disaster. Like we pointed out last week with the newest federal investigation on the currency derivatives manager. An investigation that’s conveniently being swept under the rug.
If you visit the KRS website to take a look at the latest investment return document, gander for a moment at page 3 (Warning: External PDF Link). You’ll see some interesting return data for the Northern Trust Equitization strategy that invests in stock futures and derivatives. It’s up 407.04% for one year but over five? It averaged a return of negative (-) 31.12% per year, down over 155% for the five years.
One can only hope those numbers aren’t real. One can merely hope they’re a mistake. Because this report that co-mingles returns of CERS and KERS pensions doesn’t inspire much confidence. It honestly should alarm county judges and mayors that continue to pour millions of dollars into the system.
The only thing we never doubt is the KRS staff’s love for their money manager middle men buddies. This infomercial for Northern Trust – starring the KRS CIO – is still posted today.
KRS will never learn about conflicts of interest. It’ll never learn to manage money. Do not hold your breath.