During Andrew Cuomo's tenure as attorney general of New York, he noted, "In New York, the biggest pool of money is the state pension fund." This is true with public pension funds across the nation--and Wall Street firms have leaped to take advantage of the bounty, often in unsavory ways. Over the last five years, the Securities and Exchange Commission (SEC) has routinely unearthed "pay-to-play" scandals, in which overseers of pension funds make investment choices based on personal gain.
In most cases, politicians control the investment-making decisions at pension funds. A select few, however, are controlled by their members--meaning they could invest in projects for the public good on Main Street rather than private investment funds on Wall Street. One such fund is the Chicago Teachers' Pension Fund (CTPF), a nearly $10 billion pool charged with assuring the retirement security of tens of thousands of education professionals. Despite a Board composed of 12 member-elected trustees, however, Wall Street still has its hands in the kitty. Here are six ways America's biggest investment firms have the potential to sink Chicago teachers--and just how the CTPF board can stop that from happening.
1. Underperformance
Historically, pension funds have been extremely conservative investors out of caution for their members' finances. Only in the past 20 years have they amped up their allocations to higher-risk endeavors. And as Wall Street has quaked, so too have member livelihoods.
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