Add Carl Icahn to the List Opposing MMT | Chief Investment Officer

Carl Icahn, who made his name as a 1980s corporate raider, is worried that Modern Monetary Theory (MMT) would wreck the nation’s fiscal soundness and spark ruinous inflation.

As such, the activist investor joins the chorus of prominent financial figures who dislike MMT, which is a cause célèbre of the Democratic Party’s left. Detractors range from uber-investor Warren Buffett, a Democrat, to Federal Reserve Chairman Jerome Powell, a Republican.

Icahn, who once was an advisor to President Donald Trump, told Bloomberg News: “You can print money up to a point, but after that point, it could become very dangerous. We don’t want to hit a wall that you can’t recover from. Once you get into an inflationary spiral, it’s very difficult to get out of it—and therein lies the danger.”

To be sure, the financial community is not unanimous on this point. Storied bond investor Bill Gross has said that the US could double its deficit without any problem.

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The deficit has expanded under Trump, owing to the tax cut and higher military spending, among other things. The deficit is estimated to hit $1.1 trillion in fiscal 2020.

MMT holds that a nation that prints its own currency, like the US, has leeway to run larger deficits provided that inflation is tame. The idea is to use the extra money for measures such as the Green New Deal and social spending. Rep. Alexandria Ocasio-Cortez, a New York Democrat, is its most vocal proponent.

Tags: Carl Icahn, federal deficit, Modern Monetary Theory, Warren Buffett

The $2.8 billion San Antonio Fire and Police Fund’s board aims to beef up its investments in private markets.

At a recent meeting, consulting firm NEPC presented the board a scenario for upping its presence in this arena, according to its minutes. The board unanimously accepted the proposal to invest $60 million this year for private equity, $45 million for private debt, and $25 million for real assets. Also, it will seek to enlist a private equity co-investment fund.

Rather than hire specialists in each of these areas, the pension fund went with the more generalist NEPC. “I think it just comes down to each client’s governance and internal structure [and] what they have for investment staff as to what’s the right fit for them,” Tim McCusker, NEPC’s chief investment officer, told CIO, adding that the size of the fund is key. “The larger the staff of a public fund, the more likely they might be to have multiple consultants.”

A smaller fund might require “a single touchpoint and want the efficiency of one group that can work across the entire landscape,” according to McCusker. He said an advantage of a lone generalist consultant, other than keeping down costs, is that it can focus on what works for the overall portfolio.

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The fund now allocates 57.7% to equities and 42.3% to fixed income, according to its most recent annual report. Private equity, private debt, and real assets consisted of 4.6%, 5%, and 7.5% of their respective portfolios, which falls short of its targets of 7%, 7%, and 9%, respectively.

The San Antonio Fire and Police Pension Fund was 90.3% funded as of October 4, 2018.

Cary Hally, the fund’s CIO, could not be reached for comment.

Tags: NEPC, Pension, Private Markets, San Antonio Fire & Police Pension, Texas