Tale of Woe for Major City Pension
In "Airline investment turns sour for pension boards," Free Detroit Press reporters Tina Lam and Jennifer Dixon chronicle what some may interpret as a parade of horribles. Intrigue enough for a Hollywood thriller but possibly too much excitement for plan participants, the case in point is a series of alleged faux pas. Besides alleged conflicts of interest, there are questions about suitability, liquidity, due diligence and other investment risks. I am quoted on the topic of key person risk, an issue that is far from trivial when control and monies are in the hands of a select few.
"Susan Mangiero, president of Pension Governance Inc. in Connecticut and author of a book on risk management for pension funds and endowments, said it's crucial to thoroughly investigate individuals involved in small private firms before a pension fund invests, since the managers' backgrounds and finances are critical to the firm's success.
"If a key player has a financial issue, or they're deeply in debt, how can they make good decisions about other people's money?" she said."
I did not comment about this particular situation but about concentration of power in general and the need for arms length negotiations (not to mention access to sufficient information).
