Public Pensions Under the Gun
Public pension funds, such as the Teacher Retirement System of Texas, could be in trouble if not properly managed, according to a March 2003 Harvard Business Review paper by Management Professor Dr. Leonard Bierman.
"Reining in Activist Funds" addresses the conflicts between the management of public pension funds and investment agendas. Elected board members often poorly run public pension funds, which sometimes hold hundreds of millions of dollars. That is because managers often have established political agendas and little investment experience, notes Bierman.
The solution? Boards of trustees overseeing public pension funds should be restructured, Bierman contends.
"Public pension funds must be de-politicized," says Bierman, who co-authored the paper with Mays doctoral student Christopher Tuggle and Tracie Woidtke from the University of Tennessee. "A fund structure that is dominated by elected officials is a recipe for disaster."
Bierman and his co-authors explain the most effective boards are comprised of both fund beneficiaries and elected public representatives with significant investment experience. @
-Alycia C. Zuehlke
