“A Stunning Lack of Diversification”

PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44 million American workers and retirees in more than 29,000 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.  (www.pbgc.gov)  In essence, the PBCG’s job is to take over, or guarantee, pension plans that can not meet their obligatory payouts.

Authorities, along with the PBGC, are starting to learn that there are several small pension plans (plans in the state of New York) that either had the vast majority, or all, of their monies invested in Bernard Madoff’s hedge fund.  an not read or view the news without reading or hearing about Mr. Madoff and the dramatic fall of his hedge fund because of an alleged Ponzi Scheme.

In an interview, Charles E.F. Millard, the Director of the PBGC, was asked if he thought it was unusual to see a pension fund invest all of its money like this.  His abrupt and matter-of-fact answer: “a stunning lack of diversification is all anyone can say.”

The keys to successful investing are very simple:

1.  Have a plan

2. Maintain proper diversification

3.  Manage your behavior

Comments are closed.