Does Targeted Investing Make Sense?

Watson, Ronald D.

doi:10.2307/3666084

Cited by 42 publications

(7 citation statements)

References 1 publication

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“…A similar view ofETIs is expressed by U.S. Department of Labor (1992) and Watson (1994). Freddie Mac and Fannie Mae were established originally by the federal government to ensure that affordable mortgages are available to low-and middleincome households.…”

Section: Investment Practices Of State and Localmentioning

confidence: 83%

Investment Practices of State and Local Pension Funds: Implications for Social Security Reform

Munnell

Sundén

2000

SSRN Journal

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The investment practices of public pension funds have become a topic of major interest in the wake of President Clinton's 1999 proposal to invest a portion of the Social Security Trust Funds in equities. Both supporters and opponents of the proposal point to the performance of public plans to argue their case. Supporters cite the success offederal plans, particularly the Federal Thrift Savings Plan (TSP), which has avoided picking individual stocks by investing in a stock index and has steered clear of projects with less than market returns. Divestiture of stocks for social or political reasons has also not been a problem, and TSP has avoided government intervention in the private sector since individual portfolio managers vote the proxies. Opponents of Social Security Trust Fund investment in equities point to state and local pension funds. They contend that state and local pensions often undertake'investments that sacrifice return to achieve political or social goals, divest stocks to demonstrate that they do not support some perceived immoral or unethical behavior, and intervene in corporate activity. Opponents claim that if social security's investment options were broadened, Congress would use the trust fund money for similar unproductive activities. An important question is the extent to which allegations about state and local plans are true. This study explores four possible avenues through which social or political considerations could enter the investment decisions of state and local pension funds. The first section focuses on economically targeted investments (ETIs), those investments that are designed to meet some special need within the state. The second section looks at instances of pension fund

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Section: Investment Practices Of State and Localmentioning

confidence: 83%

Investment Practices of State and Local Pension Funds: Implications for Social Security Reform

Munnell

Sundén

2000

SSRN Journal

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“…An ETI is just like any other investment, but it also seeks to fulfill a social or economic objective. That objective usually comes in the form of creating collateral benefits for a specific geographic area, group of people, or sector of the economy (Watson, 1994). The objective of maximizing yield is likely to suffer with the addition of an ETI objective.…”

Section: Competitiveness and The Public Sector Investment Functionmentioning

confidence: 99%

Public sector investment failures: theoretical contributions from new institutional and austrian economic theory

Stalebrink

Sacco

2006

Journal of Public Budgeting, Accounting &Amp; Financial Management

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This paper illustrates how two contemporary economic traditions - New Institutional and Austrian economics - may be used to add insight into the organization and governance of public sector investment programs. When combined, these frameworks offer a theoretical foundation that may be used for purposes of assessing relative levels of agency and transactions costs within different institutional settings. The insights provided suggest that one option for reducing these costs is to “outsource” the public sector investment function. The theories explored in the paper are not panacea for dealing with agency and transaction costs, but they do draw attention to key institutional characteristics that influence their size.

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“…ETIs are investments in which the fund managers take into consideration not only the investment return but also the economic benefits to the local community (GAO 1995;Watson 1994). Examples of ETIs include California's investment of US$ 375 million in single-family homes to help increase affordable housing and create jobs, Connecticut's investment of US$ 25 million in a local company to save 1,000 jobs, and Pennsylvania's decision to provide favorable interest rates for home mortgages (Stevenson 1992).…”

Section: Political Involvement: Government Restrictions and Social Mamentioning

confidence: 99%

Governance of Public Pension Funds: Lessons from Corporate Governance and International Evidence

Hess¹,

Impavido²

2003

Policy Research Working Papers

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Does Targeted Investing Make Sense?

Cited by 42 publications

References 1 publication

Investment Practices of State and Local Pension Funds: Implications for Social Security Reform

Investment Practices of State and Local Pension Funds: Implications for Social Security Reform

Public sector investment failures: theoretical contributions from new institutional and austrian economic theory

Governance of Public Pension Funds: Lessons from Corporate Governance and International Evidence

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