NY State Pension Fund...more on conflict of interest
Continuing our previous post, today NY Times talks about the brewing scandal involving the State pension fund. It shows that the whole conflict of interest issue goes beyond just the regulators. Here the folks in charge of the pension fund take money from investment managers looking to invest the funds.
As you know, the fees are high for managing large chunks of money. Let's say you get a mandate to manage $100 million (not even a large slice for NY's pension fund!), and charge a "mere" 0.10% (one tenth of one percent) of the assets under your management. That's $100,000. It's not uncommon for a bond manager to charge more than that for managing the bonds of a pension fund, so we're using a conservative figure.
If you're in the business and get a bunch of these mandates, you're making nice money. So you naturally compete hard for the business. And, apparently, it's perfectly legal for you to contribute to the campaign of an official or board member (who's a politician) in order to win that business.
You'd think that it would be obvious to all involved that it's a kind of bribe, no? But the article points out that California tried to outlaw this sort of thing in the 90's and the decision was overturned by the courts.
Ah, you knew that sort of stuff goes on. The article just points out how many "respectable" Wall Street professionals and politicians are involved in the dirty game.
As you know, the fees are high for managing large chunks of money. Let's say you get a mandate to manage $100 million (not even a large slice for NY's pension fund!), and charge a "mere" 0.10% (one tenth of one percent) of the assets under your management. That's $100,000. It's not uncommon for a bond manager to charge more than that for managing the bonds of a pension fund, so we're using a conservative figure.
If you're in the business and get a bunch of these mandates, you're making nice money. So you naturally compete hard for the business. And, apparently, it's perfectly legal for you to contribute to the campaign of an official or board member (who's a politician) in order to win that business.
You'd think that it would be obvious to all involved that it's a kind of bribe, no? But the article points out that California tried to outlaw this sort of thing in the 90's and the decision was overturned by the courts.
Ah, you knew that sort of stuff goes on. The article just points out how many "respectable" Wall Street professionals and politicians are involved in the dirty game.
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