Hard Lessons for Institutional Investors from the MBTA Retirement Fund

When do retirement plans fail? Fraud and poor investment choices are but symptoms of a disease that runs deep and poisons the well from the bottom up. Poor governance is a necessary and sufficient condition to bury an investment firm and, in the case of defined-benefit pension plans, to increase substantially the cost of providing pensions, which puts additional pressure on the already stretched public purse. This study presents the MBTA Retirement Fund (MBTARF) as a cautionary tale for institutional investors not merely with the benefit of hindsight, but as its story unfolds towards what will likely be an unfortunate conclusion.

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