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The Pennsylvania Public School Employees’ Retirement System needs to make money. Like, a lot of money. A lot more money, in fact, than the 7.25% it assumes it will make, if the $6.1 billion it’s gonna need from its younger teachers and taxpayers this year is any guide. This is why, over the last 13 years, PSERS has poured more and more of its money into hedge funds, private equity funds, prison payphone systems, Kurdish oil fields and many other things falling under the rubric of “alternative investments.” These now make up an absolute majority of the pension’s investments.

The thing is, though, like other pensions’ alternative investments, they haven’t worked, either: PSERS returned 6.38% last year, less than the 7.25% it “assumes” and roughly 1,000 basis points less than they’d need to close the deficit and get the taxpayer off the hook.

Still, it was good enough to ensure that those teachers who’ve started in the last 10 years didn’t have to pony up any extra—just, as the threshold to avoid a risk-sharing deduction from their paychecks is 6.36%. Which, admittedly, seems like a suspiciously close call at a pension run partially by the unions whose members pay into the system. At least, it does to the F.B.I. And, now that you mention it, it seems pretty suspicious to the pension itself, too. Especially since PSERS didn’t actually make that already far-too-low target in spite of all of those exotic, high-fee investments.

The error in calculating returns was a tiny one, just four one-hundredths of a percentage point. But it was enough — just barely — to push the fund’s performance over a critical threshold of 6.36 percent that, by law, determines whether certain teachers have to pay more into the fund…. Since the corrected number didn’t clear the benchmark, nearly 100,000 teachers hired after July 1, 2011, will have to contribute more for three years starting on July 1.

But, how could that be, with such can’t-miss investments as these?

In recent months, the F.B.I. had been making inquiries about the pension fund’s unexplained purchases of land in downtown Harrisburg, the state capital, according to a person with knowledge of the interviews. The purchases were made several years ago, but the land remains unused, and the pension fund has not disclosed plans for developing it…. Another placement, with Platinum Equity, put the teachers’ retirement money into a provider of calling systems for inmates. Platinum Equity was assailed as “a prison profiteer” by Nicole Hunt, head of the Philadelphia local of UNITE HERE, which represents school cafeteria workers who are members of the teachers’ fund.

Hey, Nicole: Look on the bright side. At least by your account, the fund is actually profiteering, which is more than could be said for some other Platinums that some other pensions invested with. Or, you know, those aforementioned Kurdish oil fields.

The mysterious Oilflow SPV 1 DAC was a vehicle set up in Ireland by the commodities giant Glencore, which wanted to make oil-backed loans to Kurdistan, but not with its own money. In 2016, Oilflow SPV 1 DAC issued $500 million of notes, listed on the Cayman Islands Stock Exchange, offering to pay 12 percent interest.

In 2017, when the Kurdish Regional Government was flush with the borrowed cash, it felt bullish enough to hold a referendum on independence; 93 percent of the ballots were in favor. But the move provoked Iraq to send its army to recapture the oil fields that backstopped the debt. An announcement filed with the Cayman Islands Stock Exchange said Kurdish oil exports had plunged…. There is no way of knowing whether the fund will really get that. The note, just one of the fund’s many “distressed and special situations” holdings, matures in 2022, and the outlook is murky, just as it is for the pension fund over all and the teachers who depend on it.

F.B.I. Asking Questions After a Pension Fund Aimed High and Fell Short [DealBook]

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