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Politicians Make Poor Asset Managers

Not that long ago, state legislators of various stripes told their state pension systems they must immediately divest of any portfolio investments tied to companies doing business in South Africa. The apartheid debate was front and center for nearly every public pension fund in the country.

Several funds went along with the political demands, but most did not. Pension officials took the view that bowing to divestment demands would be a complete surrender of their independent, fiduciary responsibilities owed to the beneficiaries of the fund. In truth, political interventions like these are primarily about individual politicians seeking headlines to bolster their profiles by suggesting that the massive pools of public pension cash are being improperly invested. Quite simply, tactics to politicize pension investments are never initiated in the interest of pensioners.

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