Why Pension Funds and Endowments Invest in Ponzi Schemes

Pension funds and endowments must begin separating the task of recommending what investments they should buy from the task of ensuring that they do not fall into a fraud.

In the wake of the Madoff scandal and the flood of Ponzi schemes that followed, we learned that several of the public pension funds and college endowments that lost money to those schemes had been advised to buy them by consultants employed specifically to help select safe investments.  Believing that they had taken sufficient precautions to protect the billions of dollars under their care, these pension funds and endowments followed the recommendations of their consultants only to find that they had been led into frauds. (more…)

UK Case Highlights Pension Funds at Risk

No target is more attractive to scam artists than a pension fund. It takes no more effort to defraud a fund than it does to defraud an individual, after all. And the potential take is so much larger.

According to the U.K.’s Serious Fraud Office, Graham Pitcher and Gary Cordell were the trustees for nine separate pension funds, when they decided to help themselves to 52 million British pounds of the money in those funds.  This case is a bit unusual in that the defendants worked for the pension fund trustee and are accused of taking the money directly from accounts belonging to the nine pension funds.   (more…)

Does Your School Protect its Endowment?

Among the most shocking revelations is that the trustees of some endowments actually earn large fees for investing money for the endowments. That is a conflict of interest so shocking as to defy explanation.

Dartmouth.  Harvard.  MIT.  Boston University. Brandeis University.  All lost more than 20 percent of the value of their endowments in 2009.  It comes as no surprise, therefore, that a recent study from Center for Social Philanthropy (“CSP”) at Boston’s Tellus Institute finds that endowment investment policies are broken.   (more…)

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