Much could be written about the investment activities at the AFM-EPF. One topic that should certainly be debated going forward is whether or not the AFM-EPF (or any deﬁned-beneﬁt plan) should ever invest in risky assets such as stocks. Considering the bond-like promise that a deﬁned-beneﬁt pension plan makes to its pensioners, the natural investment would be a Treasury. Another possibility is a properly hedged stock market portfolio. Unfortunately, investments like these will not deliver suﬃcient returns to support the beneﬁts members have come to expect.
If risky investments are to remain the investment of choice for the AFM-EPF, then it must be realized that losses are going to occur.9 In order to deliver promised beneﬁts, any losses must be made up from another source. But that’s for the future. For now, we will talk about the current situation and try to keep it as brief and simple as possible.
9Losses are a fact of investing life, even for the best investors. For bad investors it’s a way of life. Suing someone for losses is like suing Isaac Newton for inventing gravity.