Pension Fund Manager: Fearing Inflation, Institutions Will Turn to Gold

The director of global research at America’s seventh largest public pension is predicting that many of his peers will turn to gold to hedge against currency devaluation and inflation.

(October 29, 2009) – At least one pension fund is predicting that retirement systems will buy increasing amounts of gold in order to protect themselves against currency fluctuations and inflation.


Shayne McGuire, Director of Global Research at the $95 billion Teachers’ Retirement System of Texas, recently told Bloomberg that he expects a sea change in gold investing at large institutional investors worldwide. Accordingly, Texas Teachers’ has launched an internally managed gold fund with $250 million behind it.

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“I think the largest institutions like our own are realizing that we barely own any,” McGuire told Bloomberg. “The same thing applies to most of the pension funds that manage trillions of dollars in world wealth.”


McGuire’s—and, it must be said, many others’—interest in gold stems from a wish to hedge against a fall in the U.S. dollar, as well as worries about inflation following government actions to prop up U.S. markets, which injected nearly $2 trillion into the economy. The total U.S. marketable debt now stands at $7 trillion, an increase of 22% over 2008 figures.


“I don’t think the question really is what is gold worth, but what are currencies not worth?” McGuire is quoted as saying. “Consider the tremendous fiscal excess that major governments have made to prevent the world economy from collapsing.”



To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

State Street, Accused of Cheating California Pension Giants, Is Sued

The bank is accused of inflating prices on foreign exchange trades for CalPERS and CalSTRS, two of the largest pension funds in America.

(October 29, 2009) – California Attorney General Jerry Brown is suing State Street on behalf of CalPERS (California Public Employees’ Retirement System) and CalSTRS (California State Teachers’ Retirement System), the state’s two largest pension funds. 

The suit contends that the bank cheated the two funds out of at least $56 million, the result of overcharging for foreign exchange trades; the suit is seeking $200 million in remuneration. 

“State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California’s public pension funds,” Brown told The New York Times. “This is just the latest example of how clever financial traders violate laws and rip off the public trust.” The suit reportedly emerged from an inquiry by state investigators triggered by whistle-blowers claiming that the bank inflated prices secretly. According to The Times, the whistle-blowers claimed this practice cost the bank’s clients upward of $400 million over the past 11 years, and was conducted by using false exchange rates and reporting false prices in account statements, as well as failing to include time-stamp data. 

State Street has executed $35 billion in currency trades for the two Californian giants since 2001. 

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The bank has denied all of the allegations and has indicated that it will fight the suit.



To contact the <em>aiCIO</em> editor of this story: Application Administrator at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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