I Do Not Know Why the L.A. County Employee Retirement Fund Owns A 5-Star Hotel in Hawaii. Do You?

Do you know how long it takes the L.A. County Employee Retirement Association to save 100 Million Dollars, the minimum cost of such a hotel? Do you? Imagine how many court cases and clerk hours worked by the Employees to actually save 100 Million Dollars? So what in the world are these hard working L.A. County Employees doing owning the prestigious St. Regis Hotel on Kauai in Hawaii. First of all, Hawaii is nowhere near L.A. And second of all, Hawaii is nowhere near L.A.

The story goes something like this. I must first tell you that I worked 10 years as an investment advisor in real estate for these large pension funds like L.A. County Employee Retirement Fund. So back to the story. An Investment Advisor (that was me), in this case from Connecticut, convinces the Pension Fund Investment Board that it would be a good idea that they buy a 5-Star Hotel in Hawaii. Why, I can not tell you. I could think of many reasons then, but now I honestly can not think of one good reason.

The real reason is that the Investment Advisors for L.A. County Employees are making $100 Million annually (check annual report) on such unconscious, super-risky investments; like foreign currencies and swap agreements. Do you remember how many days or hours you thought the L.A. County Employees had to work to save $100M – well it goes right out the door…annually, to people that most of the L.A. County Employees have never met.

These stories are happening all over America. And in the end, as we are learning, the retirement dollars are not going back into our own pockets. That is stupid. I am personally guilty of it in my own 401K account. These savings are completely disconnected from our economic reality. What I am trying to say is that in my opinion, The L.A. County Employees, as do I, have much more important business to conduct at home, like taking care of ourselves and our own economy with our hard-earned savings.

There needs to be a conscious shift in the investments and assets that our pension funds, 401Ks, IRAs and good old-fashion savings, own in our economy. The simple reason: for the direct benefit of the hard working American – You! This shift will not only save a flailing economy, it will lead it towards unknown prosperity. Remember, these unconscious pension fund investment schemes have been going on since before the Great Depression!

Imagine the possibilities. I envision that local investments lead by these pension funds and individual retirement accounts will create the next Economic Boom! The institutional investments will include local renewable energy, local real estate, and local entrepreneurs; three simple, secure and diversified investment allocations. Imagine 100 Million Dollars invested in L.A. County renewable energy, local entrepreneurs and its real estate; instead of 3,000 miles across the Pacific Ocean in a 5-Star Hotel in Hawaii. These local investments will immediately generate true currency back into the people’s hands that simply created it in the first place . Otherwise known as consciously investing in oneself and one’s economy.

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  1. My guess is that the best case interpretation is that the LA county pension fund believes that investing in a hotel 3k miles away is a form of diversification. The worst case scenario is that someone on the investment advisory side likes to stay in nice hotels in far away places. If we assume the best case for a minute and look at all the reasons why not investing locally is better, earthquakes, fire, riots, etc… Then one could make a legitimate argument to get the retirement out of LA as quickly as possible. I would bet though that the quant jocks at u of c could prove pretty quickly that in this interconnected world there is no benefit to moving the money geographically far away, vs. Keeping it at home. I think the bigger threat to the utopian dream of keeping it home is the little green monster of corruption rearing its ugly head. We have all have witnessed people in power and in control that are easily corrupted by another who has self interest. The model of having independent advisors look at investments no matter where hey are I think helps detract this inevidible outcome. So…IMHO perhaps there is balance to be stricken where a % of the money is locally invested a % is influenced by the members and a % is controlled in the traditional model that we know of today. I think there is a really nice Radisson just down the street from the St Regis that was struggling to find Investors

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