"Public pensions look at leverage strategy"

I've seen this movie before.

Public pension funds needing to boost their returns but frustrated with hedge funds and private-equity investments are turning to one of the oldest investment strategies—using borrowed money to boost performance.

Good luck, folks. You'll probably need it.

Comments

[TheBigHenry]

It never ceases to astound me how ...
never mind.

[Milton Recht]

Borrowing funds to invest is the equivalent to increasing the riskiness of the investment portfolio. Since the funds are replacing risky hedge funds and private equity, the use of borrowing can keep the risk at the same level as before. It has been known for a long time that the returns are better and it is more efficient to borrow and leverage a diversified portfolio then it is to add risky investments to the portfolio. Borrowing does not guarantee greater returns and it does increase the risk compared to an unleveraged portfolio, but it will cost the funds less than the fees it paid to hedge funds and private equity groups. It will also, on average, yield a higher return for the risk than either hedge funds or private equity.

[JorgXMcKie]

Well, evidently pretty much anything is preferable to 'fixing' the defined benefit pension problem. Hey!! I have an idea. Let's raise taxes. I mean, after all, taxpayers making around the median income have absolutely *NO* problem paying higher taxes just so already highly paid public employees can gain ever higher pension payouts, right? God forbid that pensions should be cut.