Pa. state pension plan tries real estate, hedge funds to fill gap

The $25 billion Pennsylvania State Employees' Retirement System, chaired since 1992 by former State Rep. Nicholas Maiale, D-Phila., was solvent on paper as recently as 2007, but now has less than 60 cents invested for every $1 it expects it will have to pay current and future retirees. How do the political appointees on its Board of Trustees plan to cope? With higher taxpayer contributions -- which is why no-new-taxes Gov. Tom Corbett has called SERS a "tapeworm" -- but also with more of the same kind of illiquid private investments that have been a hallmark of SERS under Maiale. Here's two examples from last Wednesday's SERS board meeting in Harrisburg:

Should SERS cut a fallen hedge fund manager another break? Treasurer Rob McCord's board rep and attorney George Oliver questioned the move, but Maiale endorsed a proposal to give the money-losing manager who failed to deliver the promised stock-like returns with only bond-like risk another year to try again. Read more in my column in Sunday's Philadelphia Inquirer here. (Access code U51L if you're not already an Inquirer subscriber.)

Also: Pennsylvania commercial real estate is as slow as the state's economy, which trails the national recovery. But Maiale's board believes his old school buddy and some other well-connected Philadelphians can make money for SERS while also collecting attractive management fees. Read more in my column in today's Inquirer here. (Type in access code U51L if you're not already an Inquirer subscriber.)