Thursday, October 14, 2010

Liquidity and transparency

I caught last month when PG ER2.0 had the snippet about the city claiming some of its pension assets were illiquid.  Bram tweets that the topic came up again today.  The topic being the investment-worthiness of something that somebody knows is counted in the assets of the City of Pittsburgh's collective pension fund.

Can someone please go find out what specific assets the city's pension fund is holding that are considered illiquid?... and what is a much more interesting question.. i.e.   What basis is being used to price them at in terms of calculating their current value?  Purchase price?  There is a knot forming in my gut. For the state PMRS fellow to mention it, and for the city to have the actuary send a letter out on the subject, both imply to me that the scale is not minimal in terms of what $$ are tied up in whatever it is.

Don't get me wrong, there are all sorts of funds investing in things not quite liquid.  Some investors prefer that type of risk. Whether that risk is appropriate to the fund that is now driving the entire policy discourse in the city of Pittsburgh is something we can debate.  Even pension funds are investing in liquid assets more and more, but normally a pension fund diving into such types of investment are doing pretty well and they are doing this with money they may not need anytime soon.  Remember the Alabama pension fund manager who was briefly the owner of US Airways.

5 Comments:

Anonymous BrianTH said...

I'm guessing parking assets, because as we all know, they are the best investment ever and you should never sell them, no matter what price you are offered.

Thursday, October 14, 2010 5:55:00 PM  
Blogger C. Briem said...

I'm thinking a parking garage in Rio personally.

Thursday, October 14, 2010 5:56:00 PM  
Anonymous MH said...

They have a chinchilla farm.

Thursday, October 14, 2010 11:16:00 PM  
Anonymous johnnyg said...

I've always guessed auction-rate securities. The problem seemed to crop up about the same time as when that market froze. The WSJ and others have reported that pension funds held large amounts of auction-rate securities.

Friday, October 15, 2010 9:45:00 AM  
Blogger C. Briem said...

I know.. chinchilla default swaps (CDS)!

Ok, I only make myself laugh I know.

Friday, October 15, 2010 5:24:00 PM  

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