Geez, I hate to do this, but sometimes you have to play connect the dots. Reading this story about amateur (some would call it democratically run – small d, local government style) municipal pension plans and their investment strategies that got them caught up in the current collateralized debt obligation/securitization mess, I kept thinking to myself, where is the responsible, professional, knowledgeable fiduciary (or fiduciary retained vendor) in the investment decisions being chronicled. I don’t see them anywhere in the story. I see what appear to be the fiduciaries in over their heads and taking advice from what, in essence, are sales people. So what happens now in those cases (I mean besides the pension plans taking big losses)? Well, either the fiduciaries are liable for the mistakes they made, or they need to find – and sue – someone who is, as suggested in this piece here.
Many commentators often have a problem with fiduciary obligations and how they are interpreted, but to me, they play an essential role, and reflect a perfect fit between aspirations and legal obligations. The fiduciary alone stands in a position to protect plan assets, while simultaneously bearing the initial exposure for failing to do so, and thus has both an obligation and a deep rooted need to actually manage a pension plan well. It is not a job for amateurs, and is not simply a role in which it is enough to just do your best. Plan participants deserve, and legal obligations require, a level of expertise far beyond what is reflected in these types of stories.