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Global Pension Crisis. Unfunded Liabilities and How We Can Fill the Gap. Edition No. 1. Wiley Finance

  • ID: 2542511
  • Book
  • November 2013
  • Region: Global
  • 240 Pages
  • John Wiley and Sons Ltd
A comprehensive look at the crisis of unfunded pension liabilities and what must be done to avoid the same problem in the future

As the generational bubble of the Baby Boomers begins to retire, it is increasingly evident that governments, corporations, and individuals have failed to adequately prepare for the obligations and needs of this giant cohort. Retirees are outliving actuarial life expectancies, pension liabilities are skyrocketing, pension plans are underfunded, and medical costs rise, the United States alone can expect unfunded liabilities to exceed $4 trillion.

Even while the American economy shows signs of sustained recovery, states and local governments will still experience sharp increases in pension fund payments through the next year or longer. Global Pension Crisis looks at this situation and offers practical advice for retirement plan managers and financial advisors, while also explaining how to strengthen pensions and prevent similar crises in the future.

  • Offers a clear and comprehensive explanation of the current pension crisis for retirement fund managers, financial advisors, and economists
  • Includes prescriptive guidance on how to strengthen the pension fund system and prevent another similar crisis
  • Written by venture capitalist, entrepreneur, and former senior Wall Street executive Rich Marin
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Foreword xi

Preface xiii

Acknowledgments xv

About the Author xvii

Chapter 1 Your Worst Nightmare 1

The Family 2

The Work 9

Where Does That Leave You? 15

Chapter 2 Dimensioning the Problem 17

Calculating the Sufficiency of Savings 18

Chapter 3 You Can’t Build Your Walls High Enough 43

The Problem of Retirement Income Security 43

Generational Warfare over the “Privilege Gap” 47

Feeding the World 51

Post-Crisis Policy Adjustments 58

The Demographic Monster Stalking Us 61

Chapter 4 Money Matters 63

Enter Modern Portfolio Theory 63

The Search for Alpha 65

The Age of Derivatives 67

The Birth of Hedge Funds 72

Alpha/Beta Separation 73

The Origins of Alpha 75

Static versus Dynamic Assets and Liabilities 75

Summing Up 78

Chapter 5 Reinventing Retirement 81

Defined Benefit Plans 81

Defined Contribution Plans 82

Who’s the Client After All? 84

The Changing Landscape 85

The Perfect Storm 87

Chapter 6 Alternatives Are Not Only for the Rich and Famous 93

Pension Assets and the Move Toward Alternative Assets 93

The Great Hedge Fund Debate 95

The Institutionalization of Hedge Funds 103

Chapter 7 The Long and the Short of It . . . Trust Me 115

Alpha from Operations 116

Operational Risk 117

Securities Lending History 119

The Securities Lending Market 121

Securities Lending Flow, Process, and Mechanics 124

Ratio Lending 131

The Rehypothecation Two-Step 132

Chapter 8 Liability-Driven Alpha 137

Painting the Recent Pension Landscape 139

Risks 140

Basic LDI Guidelines 142

Chapter 9 Power Tools for Pensions 145

Pension Benefit Guaranty Corporation 146

Factors Affecting the PBGC Insurance Programs 147

Plan Terminations 149

Pension Risk Transfer 150

Synthetic Mutual Fund Notes 161

The Role for Pension Funds 165

The Yale Model (the Illiquidity Premium) versus the All-Weather Model 167

Chapter 10 The Poverty of Nations (Apologies to Adam Smith) 175

Is There a Path to Salvation? 176

The Chilean Terrarium 179

Chapter 11 The Ultimate Solution 187

The Nation, State, Municipality, and Company 187

You as an Individual 191

Chapter 12 A Peaceful Night’s Sleep 195

What Our Family Looks Like Now 198

Concluding Thoughts 201

Works Cited 203

Index 209

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Richard A. Marin
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