Why Government Pension Funds Became Addicted to Risk - NYTimes.com: "... Plunging returns on safe investments over the last few years are a sign of broadly increased investment risk and tepid prospects for economic growth. It won’t be impossible for pension funds to meet a return target of 7 to 8 percent in that environment, but doing so will involve taking on a lot of risk — which means the next stock market crash is likely to also bring another round of exacerbated state fiscal crises and cuts to pension benefits. It’s the way we’re paying for what looks like a free lunch of high investment returns on stocks. A return to boring pension funds that invest mostly in bonds would make the cost of pensions explicit and upfront, and would not subject governments to pension crises when the economy goes bad."
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