Public vs private money which is smarter?

http://www.nytimes.com/2010/03/09/business/09pension.html?pagewanted=2&hp States and companies have started investing very differently when it comes to the billions of dollars they are safeguarding for workers’ retirement. Companies are quietly and gradually moving their pension funds out of stocks. They want to reduce their investment risk and are buying more long-term bonds. But states and... [more]

http://www.nytimes.com/2010/03/09/business/09pension.html?pagewanted=2&hp States and companies have started investing very differently when it comes to the billions of dollars they are safeguarding for workers’ retirement. Companies are quietly and gradually moving their pension funds out of stocks. They want to reduce their investment risk and are buying more long-term bonds. But states and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees. Higher returns come with more risk. “In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, which oversees public plans in that state. “Double up to catch up.” Towers Watson, a big benefits consulting firm, surveyed senior financial executives last year and found that two-thirds planned to decrease the stock portion of their companies’ pension funds by the end of 2010. They typically said their stock allocations would shrink by 10 percentage points. A growing number of experts say that governments need to lower the assumptions they make about rates of return, to reflect today’s market conditions. But plan officials say they cannot. “Nobody wants to adjust the rate, because liabilities would explode,” said Trent May, chief investment officer of Wyoming’s state pension fund. [less]