Doing Homework Closer to Home

Until last week, deciding how to invest pension funds did not seem particularly exotic duty. But then came Times writer Virginia Ellis’ account of the beneficence of an organization called the Institute of Fiduciary Education.

The institute is financed by group of international money managers, all interested in getting their hooks into some of the $80 billion held by two public pension funds in California, the Public Employees Retirement System and the Teachers Retirement System. Over the past four years, the students of the fiduciary institute have included 16 members of the governing boards of those pension funds. Their education has consisted of flying overseas, putting up at world-class hotels, dining sumptuously and attending seminars on how easy and wonderful it is to invest abroad.

Said Keith Chun, a member of the board of the teachers’ system, of one such trip to Tokyo: “That one week has got to be my example of how the rich and famous live.”

The money managers certainly knew what they were about. For an expenditure that the board members themselves estimated at a grand total for all 16 trips of less than $1 million, tops, the fiduciary institute has gotten commitments of $9 billion in foreign investments from the public employees’ fund alone. The teachers’ system is still examining what its board learned at its seminars hither and yon.

The splendor of the learning environment of these fledgling foreign investors set us to wondering what the portfolios of the two pension funds would look like if the board, like its pensioners, had been asked to pay its own way to Paris or Tokyo or wherever. Would the commitment to investing abroad be any different had the board members been handed a stack of books with all of the relevant statistics and asked to spend a week of their next vacation plodding through them?

The more we pondered those questions, the more it seemed to us that the way to get the answers would be to change the rules so that the board members from now on would learn about investing abroad the hard way: At a seminar or over a desk somewhere closer to home. The teachers and other public employees who will depend on their pensions funds when they retire come by their contributions by working for them. The board members should come by their knowledge about investing those contributions the same way--not by hoping to chance on a morsel of wisdom along with their fine wine and rare steak.