As a state employee and soon-to-be retiree, I was deeply concerned by the recent Oct. 13 business article “N.C. raises bet on private equity to boost pensions.” It demonstrates the ignorance of financial realities by both the treasurer and state lawmakers who want to increase the retirement fund’s holdings in risky alternative investments.
We are wasting millions of dollars each year paying active money managers to manage the state retirement fund. Anyone who believes they can consistently beat the market by active management of their funds is ignoring the vast majority of academic research and industry data. Investors are better off with low-cost broadly diversified index funds, so that they avoid excessive compensation and fees and get very close to the same returns as the market.
I don’t want my retirement fund in risky investments or wasted on highly paid money managers. The treasurer should take the advice in Andrew Silton’s column in Work & Money or read books by Jonathan Clements, who once had a column in the Wall Street Journal Sunday section. Both of them recommend indexing rather than chasing the latest popular investment.