Again I point to Leo Kolivakis. He’s testifying to Canada’s Parliament:
By shifting assets out of safe government bonds, first into equities and then alternative investments like hedge funds, private equity, real estate, commodities and other risky investments, pension funds have contributed to systemic risk of the global financial system.
This process is what I have dubbed the global pension Ponzi scheme because pension funds were investing billions into alternative investments, ignoring the securitization bubble and without due consideration of how their collective actions are affecting the soundness of the global financial system.
Pension funds claim that the shift into alternative investments was done for diversification purposes, to “smooth” overall returns and to deliver absolute returns.
However, there was another reason behind the shift to alternative investments: it allowed senior executives at pension funds to game their policy benchmarks so they could collect huge bonuses, claiming they are adding value to overall returns.