61% underfunded Illinois Teachers Pension Fund goes for broke, becomes next AIG-In-Waiting by selling billions in credit default swaps
81.5% of their portfolio is considered risky. Presumably their managers assume the fund will be bailed out if needed and, hey, they’re paying themselves big salaries and have no skin in the game, why should they care what happens..
The fund currently is trying to generate maximum income in a doomed attempt to catch up by trading extremely risky financial instruments. And, dear God, they’re even doing interest rate swaps, with pensioner’s money.
This should not be legal. This isn’t a hedge fund speculating with money from the wealthy. It’s a public pension fund taking deranged risks with the retirement money.
Swaptions, Euribor exposure, curve trades? What the hell happened to buy and hold. Does TRS really expect to survive this, when there are sharks like Goldman who know every single trade the TRS has on, and one day, sooner rather than later, will destroy it, but not before margin calling it to death in the process.