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The Chicago Policemen’s Annuity and Benefit Fund (PABF) –commonly referred to as the Chicago Police Pension Fund–is one of the worst funded public pension plans in the United States today, with a funding ratio of only 23 percent.
A group of retired and disabled officers, along with widows, has long questioned the trustees and management of the struggling pension. Dissatisfied with the responses they received, the group formed the CPD Pension Board Accountability Group.
Funds were raised to commission an independent forensic audit of the pension and an expert in pensions was retained recently to conduct the review. As Forbes readers will recall, in my recent book, Who Stole My Pension?, I encourage pension stakeholders to band together to fund independent forensic investigations by pension experts of their own choosing–to get a second opinion as to whether the pension fiduciaries and Wall Street “helpers” they have hired to manage investments are doing a good job.
You can and should get involved in scrutinizing the pension you will be relying upon to provide for your retirement security, I wrote.
While the forensic investigation by pension expert Chris Tobe, a CFA and former trustee of the Kentucky Employees Retirement System has just started, the preliminary findings are significant, says Tobe. The group hopes the final report will result in much-needed changes that will improve the financial health of the PABF while also increase transparency and accountability for the operations of the fund.
While one might think one of the worst funded pensions in the nation would have a conservative liquid investment portfolio, the PABF only has 35 percent of its investments in liquid, transparent Level 1 assets which include blue-chip stocks as well as cash and treasuries. At least 35% are in illiquid alternatives, says Tobe.
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Alternative investments in public pensions which include hedge funds, private equity and real estate have come under increased scrutiny recently for their valuation, performance numbers and excessive management fees, as illustrated in an ongoing FBI investigation of the Pennsylvania Public School Employees’ Retirement System.
A call to the pension for comment went unanswered.
