Should have asked him at the beginning if he thinks defined contribution or defined benefit is better. He downplays the 50% underfunding and speaks like it is nobody’s fault. It is the politicians fault. He is no expert other than how to be a socialist mouthpiece. Those risky strategies sorting volatility work until they don’t. Selling the wings can work 95 out of 100 times but those 5 times will ruin you. Raoul should not allow people like this on his platform. Leo's position is no pensioner should have their "promised" benefits reduced no matter what without considering the taxpayer who will have to make up the shortfalls, where is his consideration of the following generations who are slaves to paying these excessively promised pensions. I am talking about public sector pensions, promises made by politicians with usually public sector unions with no taxpayer representation when negotiating our future indebtedness. The worker is complicit in that they knew or should have known, and cared, that the promises could not be kept. Purposeful ignorance is not an excuse to steal from every taxpayer.

Genuinely wholesome guy! Thanks, Leo. Appreciate your time on RV! It is also true that limits on compensation for pension fund managers has hurt the talent pool of the industries investment managers for a very long time

Was watching the whole interview, but was really hoping to get some more information from it. I would like to know at which level of solvency the regulator steps in? Is it 30%, 50% If there is no absolute limit, at which point have historically US Pension (local) Funds been restructured? How was this done? If you bail out a pension fund, what does that mean? Will pensions now be paid by the federal government? Or by some PF safety fund (PBGC, like PPF in the UK, but with pay-outs capped)? Or will solvency be improved to 100%, through injection of capital? If all the local PFs in the US were to be bailed out, how much would that be (I was reading in the FT that average funding was ca 62% before the sell off)? How could it be funded? I think it is a shame these points were not addressed. If anybody knows the answers or where I could find them, please let me know!

From my experience Pension Board members are well intentioned but are but out of their league when it comes to selecting the fundsand investments they invest in. Wall street calls pension funds " dumb money".

Public sector pension funds and their funding deficits are an unmitigated disgrace! Could you expect it to be anything else when public sector unions sit down across the negotiating table from the politicians whose election they have just funded?

Forgetting the blame game for a second, what do any of you predict actually happens? Can anyone tell me how or why someone would buy a bond from Chicago at this point, or the state of Illinois? The former can actually go bankrupt as a matter of law currently (not that it will do so willingly), so it's a better focus of the question.

Well done. Good perspective on how the pension industry thinks. Defined pension plans cannot pay for themselves except in a perfect world of predictable returns and predictable corporate profits forever. That world never existed and the new normal will be even less able to fund them. After living in Toronto for five years many years ago, it is not surprising to me that the Canadian pension plans are better run internally than US pension plans run by hedge funds. What surprises me is that anyone can imagine that a defined pension plan will work for all seasons. As a taxpayer, I am not willing to bailout public pensions plans where defined benefits may be more than ten times the average American wage. This dog just will not hunt. The concept of going bankrupt first may be a tactic to attenuate the excessive public pension fund payouts. This, of course, would not apply to the Senate pension plan which is completely unfunded like all Federal pensions. DLS

Decided to take a refund (return of contribution plus 7 % interest) rather than take a Calpers pension. Believe that cuts would have been an inevitability. Yes that was my bet but allowed me to pay off mortgage + incurred tax liability which was the better bet in my judgment.

Leo Kolivakis fails to acknowledge the moral hazard of some states deliberately underfunding their pensions, while other states, like Wisconsin, were not underfunded. To this day states could just raise taxes to obscene levels to fund their pensions, they just don't want to because, quite rightly, once the bill is presented to their residents, the residents will flee. But that's the point - why should other citizens bail out Illinois? And what would prevent Illinois from RAISING their pension benefits and continuing to underfund if they know they are going to always be bailed out? Why not then just promise all public sector employees the moon and collect no taxes at all? Moral hazard is severely underaddressed - this idea that the states are in trouble "through no fault of their own" is hogwash.

It is not surprising that many American pensions are run by hedge funds. This will be another case where hedge funds get the profits and bonuses and the pension losses will be socialized. Is there no common sense? DLS

The millennials should really hate the concept of the US going into massively more debt to bail out public pension funds while millennials are trying to pay off student loans. I think the US debt may be getting out of hand - tongue in cheek. DLS

This guy fundamentally misunderstands the American voter and the American taxpayer. Saying that Paul Krugman "destroyed" anyone tells me all I need to know about him.

...people who run this pension funds are very competent..." Why would a competent organization need bail out. The fact that they need a bail out automatically implies that they are incompetent...this applies to ANY company that needs to bailed out. Why are we rewarding these incompetent organizations by bailing out with out tax money. Had we let banks failed in 2008 we would had flashed out those incompetent CEO's. Instead they got rewarded.

How does the U,S, central bank stepping into the muni space factor into this?

So Canadian pensions are more sophisticated than American pensions but they were widely selling naked vol as a strategy. This was just a one off so it wasn't a mistake....This must play at cocktail parties he wants to be invited to.

State pensioners have no "right" to pensions from the Federal government. That's not how America works.

Hahaha. @ 5:30 he says, "Lehman Marcus". Freudian slip XD

Mr. Kolivakis bolstered my petty retired-Canuck parochial biases, thankyou. But Mr. Harrison's insightful questions focussed on a few less laudable events - mal-investments and short vol trades gone wrong. Vol trading is certainly an area I don't understand (just an old theatre bum), but for a long time I've watched huge volumes of short SPX straddles placed just outside the week's expected move. When the move exceeds expectations, corrective action seems to be to try to force the index back within expected limits through computer automated buying/selling heavy-weight constituents of the index. The problem is this 'corrective action' is inherently unstable and only works within limits, so when the whole ball of wax goes south, it does so with some zest. As pensions and insurance are two sides of the same coin, could Real Vision please consider a session on how the world's insurance industry is coping?

Great comments from RV folks below which I second 100%. Good review overall though. I have monetized my US pension into a lump sum because the annuity option is stupidity. I also have a DB pension out of my companies UK based entity which yields an inflation protected pension. I can also cash it out but its 100% funded even after the recent market collapse. I am still very nervous about will it stay that way for 10 + years? Not quite sleepless nights yet, but.......

Public DB pension liabilities MUST be cut, and cut dramatically. The should be zero Federal bailout of public pensions. Very few in the private sector have DB plans, and most of those that did froze them 10-15 years ago (or at minimum went to cash balanced version). The private pensions were not nearly as generous as public plans. The private sector produces ALL the value in the economy, and they have increased their productivity, while public sector has had no productivity growth for years, e.g. Baumols Disease. (The cost per pupil to teach in pubic schools has gone through the roof in the last 40 years.) If the Fed gives $$$ to public pensions, these should give similar value to every private sector work or retiree.

Ed & Leo, I appreciate your views. However, there are some points for disagreement. Full disclosure: my wife is the recipient of a public pension (teachers). When you mention the political pressure that public employee unions on politicians such as McConnell, you fail to take into account that those union members won't vote for Republicans. In fact, we believe that those union members (my wife never joined) hate us. We are "deplorables" to them. Politicians such as Mr. McConnell are aware of the huge pushback they would receive from their voters if they bailed out the public pensions without some type of significant "haircut" on the part of pension recipients (yes, including my wife).

As an Albertan, I see only incompetence when the fund is short vol when US gdp and inflation are both slowing - those involved should be fired and banned from working in the industry