How one of the world's biggest finance companies misread Covid-19 and cost pensioners billions
Vanguard. It's so simple. Even Buffet says Vanguard.
It's. Not. That. Complicated.
People can't help it, I suppose. They want to feel like they're gaining slightly on others, want their retirement to have some action on it, want to feel smarter. You're not smarter and more informed and - most importantly - you don't have the cold-blooded viciousness that these people have to take money from a 65 year old teacher who struggled her whole life.
The people I really feel sorry for are those that have idiot pension managers that don't just f'ing invest in Vanguard. The pension managers get in trouble the same way, trying to look really smart.
It feels like the Charlie Munger classic "Show me the incentives and I will show you the outcome." fit well here. Very sad for the people that entrusted their pension money to the pyramid of financialization.
The vultures at Allianz also voided out their travel insurance policies during march to avoid paying claims due to covid travel interruptions.
Just saying this is exactly why I subscribed to MT. You don’t really get a laser eye on financial corruption anywhere else.
I invest in Allianz. You are not supposed to sell in a sudden market dip, that is made clear to investors. My funds are not only back to where they were, they are higher than they were. They were down something like 35% at one point. I did not sell. I have collected the dividends - the same amount each month, throughout the pandemic.
Betting on the VIX going down just says the market is going to stop panicking, which is exactly what it did, and in rather short order. I am sorry to hear some people sold into the dip but they are advised against that. Allianz is a fine company and I trust them with a significant portion of my portfolio. - I thought Matt understood investing better than the evidence in this article.
Pensions invested in the stock market - safer than the old TWA plan? What's the difference between an "invester" and a retired worker? This is a sad story of globalized markets.
Great story, Matt. I work in finance and I haven't seen this story written with this detail.
To my recollection, Alberta Investment Management who manages pension funds for most Alberta government employees and probably a lot of the oil worker retirement funds, made a similar short bet on VIX.
They lost something in the range of billions, at least at the time it was being reported on in April. Don't know if that's been reduced as the market recovered or what.
This kind of activity, as well as the oncoming pension crisis, spells financial doom / crash.
Allianz had the right idea. Bad timing. The biggest problem is not their idea but going in big. This made it a "big win big lose" situation something pension funds should never do
I can't figure date this article was written -- please help with dating ! Many thanks
Dumb to call them villians. No one has to invest their pension funds, they choose to, and they choose to at risk. It's a greater villainy to exploit political power on municipalities that result in padded civil employee union pensions that bankrupt them. Or, in the case of the Minneapolis police, protect them from proper discipline and thus from cultural change.
hedge funds are generally terrible investments. I've invested in both hedge funds and pe funds, and at least with pe funds you can get a decent return even after the egregious fees. Even in good years, hedge funds struggle to beat the stock market, and as per this article every once in a while you face a supposed black swan event and suffer huge losses. Just a small quibble with the article, I don't think the flood insurance before a hurricane analogy works. I'm too lazy to do my own research but the analogy states it's like selling flood insurance just before the hurricane hits. But the story says that Allianz was betting on declining volatility at the peak of the crisis. Obviously they didn't really do that because they would have made a fortune as volatility did come crashing down as quickly as it rose the previous month. So my guess is they jumped the gun by a week or two, bet on declining volatility while it still had a ways to go, but well after it had already risen dramatically.