Peace at Last for California's Pension System?

(August 28, 2012) — Democratic leaders in California have agreed on a plan to overhaul the state’s public pensions, raising new employees’ retirement ages and contribution requirements, according to Reuters.

“These reforms make fundamental changes that rein in costs and help to ensure that our public retirement system is sustainable for the long term,” Governor Jerry Brown said in a statement. “These reforms require sacrifice from public employees and represent a significant step forward.”

The package stipulates that new public employees must pay for at least half of their pensions, and grants local governments the power to raise employee contributions. Under the reformed rules, new hires will have to work an additional two years before receiving pension benefits in retirement.

“No more spiking, no more air time, no more pensions earned by convicted felons,” Brown said. “We’re cleaning up a big mess and the agreement reached with legislative leaders today is historic in its far reaching implications.”

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The overhaul plan must be passed by the legislature by Friday, Aug. 31, the last day of the 2012 legislative session. Democratic leaders plan for a full state senate and assembly vote to take place on that final day.

California has the largest public debt of any state, in large part due to its fattening pension liabilities. This reform package leaves in its wake countless divisive op-eds, defensive press releases, and threatened litigation. Public funds and their investment teams, including the state employees’ and teachers’ pension systems, have been harshly criticized by the press and, in San Francisco, investigated by a civil grand jury.

(August 28, 2012) — Vinay Pande, the chief investment advisor of Deutsche Bank, is set to leave for Brevan Howard Asset Management, a $36.7 billion hedge fund.

Pande served as chief investment advisor of Deutsche Bank since 2006, based in London and New York.

“He hasn’t done exceptionally well this year, with performance being flat. Given cost-cutting at the bank, I’m not surprised by his departure,” a Deutsche employee, who agreed to comment on anonymity, told aiCIO, adding that London-based Brevan Howard, a global alternative asset manager, is a Deutsche Bank client.

The firm, founded in 2002, has also grown to be the second-biggest hedge fund firm in Europe.

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Pande was unavailable for comment by the time of publication. Sigalit Grego, a spokeswoman for Deutsche Bank, declined to comment.

Pande worked for more than two decades as a trader, running a macro strategies fund for hedge fund Caxton Associates between 2003 and 2006 before joining Deutsche. He obtained his MBA in finance from the University of Pennsylvania’s Wharton School.

In January 2008, Pande told the Wall Street Journal that the outlook for US financial markets is either “outstanding or awful,” with little chance of something in between. He also said that there would be a 60% to 70% probability of “outstanding” returns over the next three to five years. He noted that the reason for his optimistic expectations were largely due to growth in emerging markets.

Pande’s expectations in January 2008 surely proved to be overly optimistic. He did correctly predict at the time that the outlook was “bimodal,” a term meaning the likeliest outcomes are banded around two opposite extremes as opposed to in the middle.