It is a well-known fact that public sector workers are (a) greedy, (b) not productive (in fact they’re anti-productive), (c) over-paid and under-worked with big fat pensions, and (d) the single most important cause behind our recession and the poor showing of the Irish football team. How do I know all this? Because I read the Sunday Independent, that thoughtful and erudite journal. Now take the private sector – lean, competitive, efficient and productive; a real can-do engine of growth and light. So imagine my shock when the National Pensions Reserve Fund (NPRF) issued its latest report. Oh god, it has turned my universe upside down.
I must confess I’m dubious about the whole logic of the NPRF. I mean, it doesn’t make much sense for the Government to borrow money to put into the Fund. I’m not too gone on the idea of the Fund playing roulette with our money on the stock exchange (its investment returns collapsed by 12% in the first half of the year). There are better, more productive ways of using this Fund, which I will get into in later posts.
What interests me here is the comparison between the record of the Pensions Reserve Fund (managed by the National Treasury Management Agency) and Irish-managed pension funds. Because, according to the worldview of the Sunday Independent columnists (Gene Kerrigan being the shining exception), the public sector should be blowing our money while the private sector should be raking it in. Except:
- For the first six months of the year the NPRF’s investments returned -12%; the private pension industry returned -14.7%
- In the second quarter of this year the NPRF returned -1.7%; the private pension industry returned -3.8%.
So both sets of funds lost, but the publicly-managed NPRF lost less. Of course, maybe in this short-term they got lucky. After all, every punter gets a streak once in a while. Let’s take a longer term look:
- In 2007, the NPRF was in the black with a return of 3.3%. The private industry fell: -3.7%.
Wow, that’s some difference. Public good, private not so good. But what about the really long-term? Here’s the record since the foundation of the NPRF in 2001:
- NPRF: 3.8% on an annualised basis
- Private pension funds: 1.6%
Good golly – this public sector agency is twice as productive, twice as efficient, twice as growing as their private sector counter-parts. I don’t understand. I’m sure this weekend the Sunday Independent will explain it (maybe the NPRF cheated, or threatened other fund managers in darkened back alleys – I’m sure there’s a plausible explanation)
But in the meantime I’ll just ponder this: if the public sector is so much better at managing pensions funds, how would they be with banks? Or a telecom company? Or any other number of economic activities (or lack thereof in these recessionary times) which we have been hoodwinked into thinking that the private sector, and only the private sector, can operate efficiently and productively.