Synopses & Reviews
Praise for
Global Pension Crisis"The global pension crisis is an increasingly important topic for business school students to understand. It will set the tone for prosperity in the U.S., Europe, Asia, and, in fact, most emerging markets in the coming years."
Soumitra Dutta, Dean of the Samuel Curtis Johnson Graduate School of Management at Cornell University, and ex-Deputy Dean at INSEAD, France
"Often in his career on Wall Street, Rich Marin proved himself one step ahead of his peers. Now he shares that prescience with us in Global Pension Crisis. He could not have picked a better topic: the perils of underfunded liabilities, once abstract, pose an all-too-real threat to American prosperity. Marin's diagnoses are lucid, right on the mark, and timely. This is a can that can't be kicked down the road any longer."
Charles Ruffel, Managing Partner, Kudu Advisors LLC
"Marin's highly readable discourse on worldwide pension underfunding hits the trifecta: it is informative, eye-opening, and eminently useful. "
Stephen Keating, Cofounder, Penbridge Advisors
"Everyone who cares about the pension predicament should read this book and, more importantly, engage with its arguments. They are realistic as well as optimistic, and that is a rare combination in this field."
Dominic Hobson, Editorial Director, myInvestor Circle
"If you are over 50, the nightmare is the prospect of outliving your savingsthe pension crisis. What do we do when we're old? Rich Marin has written an important book on the topic that, uniquely, normal humans will find clear, useful, and actually readable."
Bo Cutter, Senior Fellow and Director, Economic Policy Initiative, Roosevelt Institute
"The author's background and experience provide him with the tools to analyze and describe the pension problem with the drama that it will have in the years to come. It is time to do something now. A great book for the general public to become aware of the problem."
Juan Bilbao Hormaeche, Chairman and CEO, Consorcio Financiero SA
"The book offers practical and insightful lessons on Wall Street finance, or more accurately, lessons in the financing of life. Yes, it also does cover well and uniquely the pension crisis."
Harold Bierman, Jr., Harold Bierman Distinguished Professor of Management, Cornell Univerity
Synopsis
Around the country, state and local fiscal pictures are starting to look better. Tax revenues rose in every state in 2011, and while states continue to have structural budget gaps to close, this year's gaps are a small fraction of the ones states were dealing with in 2009 and 2010. But one big problem continues to show little improvement-- unfunded pension liabilities.
Measured on a market value basis, these unfunded liabilities (combined with those for retirees' health care) exceed $4 trillion, which is more than the total amount of bond debt outstanding from states and localities. And because of the way pension accounting works, most states and local governments can expect to see continued sharp rises in required payments into pension funds at least through 2014. While most parts of states' fiscal pictures are improving, this one continues to deteriorate. The book explains how this problem has developed and what must be done to strengthen pensions and avoid similar long-term problems in the future.
Synopsis
A comprehensive look at the crisis of unfunded pension liabilities and what must be done to avoid the same problem in the futureAs 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
Synopsis
The world is facing an economic time bomb.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 chronically underfunded, and medical costs continue to rise. The United States alone can expect unfunded liabilities to exceed $7 trillion over the coming yearsand it's in better shape than many other developed nations.
Even as the American economy shows signs of sustained recovery, many states and local governments will still experience sharp increases in pension fund payments over the coming years. In fact, the next forty years of the world's economic life will be dominated by one underlying theme: how we deal with the retirement income security of a growing, aging, and longer-lived global population. It's a problem we can't ignore and can't outrun, impacting virtually everyone on Earth.
Global Pension Crisis looks at this situation and offers practical advice for retirement plan managers and financial advisors, while also explaining what people and nations can do to strengthen pensions, improve retirement outlooks, and prevent similar crises in the future. It looks at this looming disaster not only through a macro-level lens, but also provides a micro-level look at how the issue will impact individual retirement income and retirement planning.
Global Pension Crisis suggests difficult choices that must be made, as well as personal preparedness for anyone concerned about retirement. It explains worst-case scenarios if nothing is done to solve this looming problem, including the growing anger of young workers forced to toil to maintain their parents' lifestylea lifestyle they may find forever beyond their reach. This "Privilege Gap" that is being created may well lead to one of our next great challenges: avoiding generational warfare.
Global Pension Crisis argues that in an interconnected global economy, none of us can hide from this problem, and no single nation can solve it alone. But solve it we must, because this is much more than a financial problem we can fix with tax reform or kick down the road; it's a pervasive issue that directly affects the quality of life of our families, friends, and coworkers.
About the Author
Richard A. Marin is a former Wall Street executive who currently serves as President and CEO of the New York Wheel project. He teaches finance and asset management at the Johnson Graduate School of Management at Cornell University, where he is a Clinical Professor of Asset Management. He is the founder of Beehive Ventures, a venture capital fund, and Ironwood Global, a distressed mortgage hedge fund.
Table of Contents
Preface xiAcknowledgments xiii
About the Author xv
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