Investment Decisions for Public Pension Funds

by D. Tyndall



The article presents information on investment decisions for public pension funds. The fear of inflation, the high dividend-price ratios of the immediate postwar years and the investment policies of the private pension funds have created growing interest in the possibility of investment of public pension funds in common stocks, but to date the amount of such investment has been very limited. In this uncertain world, it is never possible to know with certainty what portfolio will provide the maximum yield. Instead, one is faced with certain objective information as to the past and certain more or less firmly held ideas as to the significance of this information for the future. In some instances, these ideas can be formulated in terms of probability distributions, in other instances, the most that can be said is that the past indicates that there is a distinct, though possibly very small, chance that a certain event (or related sequence of events) will occur. If such an event is likely to have a highly disastrous or highly desirable impact on the yield of a certain type of investment medium, it should be taken into account in some way in determining the best possible decision.

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