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Private Equity Burns State Pension Fund with FTX Investment

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Male hand close-up, holds burning money in hands, burning US dollars. Black background, isolate. The concept of inflation, a decrease in the purchase of foreign currency, and devolution.

By Marko Aliaksandr @ Shutterstock.com

You have read for years that Your Survival Guy is worried about the risky bets being made by state pension fund managers who, after politicians overpromise and under-fund for state employee retirements, are left chasing performance to fill in the gaps. One way states have attempted to juice performance in pension funds is by allowing them to invest in private equity. The problem is that these investments are often riskier than what’s available on public markets and don’t always turn out well. Missouri is the latest state to find out that riskier investments in private equity can come back and bite pension funds. This time, the private equity fund was one run by BlackRock, and was partially invested in the recently collapsed cryptocurrency exchange, FTX. The Kansas City Star reports:

The Missouri State Employees’ Retirement System lost roughly $1 million because a private equity firm it invested in was invested in FTX, the embattled cryptocurrency exchange that filed for bankruptcy last week. T.J. Carlson, the pension fund’s chief investment officer, informed the retirement system’s board of the loss on Thursday, Missouri Treasurer Scott Fitzpatrick and another source familiar with the investment told The Star Friday.

Fitzpatrick is a member of the board because of his role as treasurer. He was elected Missouri auditor last week.

Fitzpatrick and the other source identified the private equity firm as BlackRock, a New York-based asset management firm, and said BlackRock had invested some of that money in FTX. The amount lost won’t affect MOSERS’ ability to pay pension benefits, Fitzpatrick said.

Candy Smith, a spokesperson for MOSERS, said in an email to The Star Friday that the system had roughly $1.2 million of exposure to FTX when the crypto company filed for bankruptcy. Smith said the loss is an estimated .01% of the MOSERS total portfolio exposure.

A representative from BlackRock declined to comment Friday.

You no doubt remember BlackRock from everything Your Survival Guy has written on the company’s ESG efforts, where you invest, and they win.

And FTX has been in the news quite a bit:

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Action Line: Don’t run your personal investments like pension fund managers are running them for so many state employees. You don’t want to have to rely on the market to do something for you. You want to keep what you earn. Sometimes it’s more about the return of assets than the return on assets. If you need help, let’s talk. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter and get to know me better.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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