Trillions in Retirement Dollars Flow into Opaque Trusts
bloomberg.comThis article feels overblown.
Here’s a trust that has 250 billion, but reports prices and does many other things the article says isn’t required: https://workplace.vanguard.com/investments/product-details/f...
Not opaque and it has lower fees than the retail S&P 500 funds.
Yes I don’t get the worry on an individual basis. If my money is in a CIT they tell me exactly what it’s invested in and it is audited every year.
The worry here seems to be on a systemic level, rather. No one knows how much in aggregate is in these types of trusts nor how it is in aggregate allocated. Which may be a concern from a systemwide risk management pov but far less so for an individual worker.
Using Vanguard anything as a counter-example isn't terribly persuasive; they're unique in the market.
Given the Bloomberg article explicitly calls out Vanguard, I don’t think using it as a counter-example is inappropriate.
In the context of the article, this type of trust you linked has got to be the special case of all special cases.
Since that trust is tracking the S&P 500, it has to be literally equivalent to its VOO ETF counterpart. If it ever rebalanced in a way that no longer tracked the S&P, or even mysteriously changed disclosure in some way, investors would dump it the next day (for an index fund that is literally the same except for expense ratio and disclosure rules).
Moreover, everything in that trust is quite obviously publicly traded companies. The article is about retirement funds gaining access to private markets[1].
tldr; this ain't that.
1: clarification edit. Also, my gut tells me I should have written that as "private markets gaining access to retirement funds" but I really don't know enough about it.
There’s a really good video of how retirement accounts have become wall street’s favorite piggy bank to borrow from. TLDR; the money rewards bad behavior because governments are too scared to let people’s retirement accounts collapse.
Why would an investment manager choose a CIT over an ETF? I can't help but think there's additional fees being collected somewhere.
To adapt a popular phrase to personal finance, "If you don't understand the product, you are the product."
CITs are cheaper than an ETF, which is why they might be chosen.
whenever I see headlines like this, I always think: great opportunity for someone to create transparent trusts then?
am I super biased or fully drank the Kool aid if I believe entrepreneurs are the solution to many of society's ills?
If entrepreneurship is the solution to society's ills why don't entrepreneurs solve societal problems? (note this criticism is equally effective when pointed at non-profits)
If there were profit in it, they would.
Society's ills tend to concentrate around people with no money or resources. There's no profit to be had solving their problems, so entrepreneurs are not interested.
Non-profits on the other hand, depend on the existince of the problem to justify their own existence. So they are not well-motivated to solve those problems, quite the opposite in fact.
For everyone but the individual account holders (who have ~no voice in this market) the opacity of the trusts is a selling point, isn't it?
I don't think "finance people" === "entrepreneurs".
They're completely different groups (except finance entrepreneurs I guess), and it's the former that causes a lot of societal problems (although, arguably, the people whose money they manage are just as responsible, if not more so).
I think you drank the 2016 HN kool aid.
> The worry is that vital investor protections are being sacrificed in pursuit of lower costs and lesser oversight. Those concerns are likely to grow as CITs look set to become the go-to vehicle to add more private market exposure to retirement plans. The Trump administration is laying the groundwork for 401(k) investors to get easier access to assets that don't trade regularly, like real estate and private equity.
> In addition, Congress is proposing a path to let CITs gobble up even more of America’s retirement savings. A current move by US lawmakers to allow the pots of public school and nonprofit employees into the trusts has been described by one member of Congress as “the single largest deregulatory action we have seen in years.”
This is corruption in action. Corrupt leaders are quietly attempting to make a profit off of citizens' retirement plans, with no plan to protect those citizens once the market inevitably implodes.
Defined benefit pensions are the perfect vehicle for corruption, and taxpayer funded ones 10x so.
> Defined benefit pensions are the perfect vehicle for corruption
How so? Defined contribution allows you to put in more than you get out. I don't contest the taxpayer-funded part.
> Fixed income collective trust funds typically invest primarily in various types of debt instruments, such as treasury bonds, treasury bills, corporate bonds, sovereign government bonds, secured and unsecured loans, and different types of derivatives based on these instruments.
There were some issues with that in The Great Recession: https://en.wikipedia.org/wiki/2008_financial_crisis.
> Disadvantages include less transparency than traditional mutual funds, difficulty tracking performance, and less oversight of management.
So less verifiable.
That's just what you want to see related to money that millions depend on for retirement. /s