Private v Public Pension Funds & Who MUST Own Govt Bonds

QUESTION:  Martin.
Do you give credence to the work of … ?
Can’t government pension funds be privatised or sent to open market?
Thank you.


ANSWER: No, I do not. The problem is far more complicated. First, you clearly have tremendous losses already. If you privatized the various government pension funds, you then have many laws that have to be altered. You would have to take away the political playground of politicians. In California, for example, the politicians directed the pension fund to INVEST in “green” companies for the environment. They lost a ton on money on that one.

Secondly, we have governments who have directed that a percentage of pensions MUST be “conservative,” and that they EXCLUSIVELY own government bonds. Even the Social Security system is 100% invested in government bonds. While no OECD countries impose a ceiling on investment in government bonds, there are actually four countries applying minimum floors that require they own government debt. In Austria, for example, pension funds are required to invest at least 35% of their assets in mortgage bonds, government bonds, and euro denominated debentures. French pension funds must invest a minimum of 50% in EU government bonds. In Denmark, pension funds must invest a minimum of 60% of their portfolio in domestic debt. Finally, in Mexico, pension funds must invest at least 51% of fund assets in inflation-linked or inflation-protected securities, and at least 65% in securities that either have a maturity shorter than 183 days or floating rate notes whose rate is revised in less than 183 days

As far as PRIVATE PENSION funds, keep in mind that many can invest in what they want in North America. The following table is a list of restrictions on pension funds and their investments in selected asset classes. There are only SEVEN nations that do not regulate the mix of private investments in a pension fund — USA, Australia, Ireland, Japan, Luxembourg, Netherlands, and New Zealand (which the new socialists want to change).

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