Paul Rose, ‘Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds’

Abstract
This Article challenges the standard doctrine that public pension funds should be managed solely for the benefit of plan participants and their beneficiaries. Instead, economic logic suggests that public pension fund trustees owe their duties to the public collectively. This analysis is driven by the fact that, in practice, individual pension fund claimants function more like senior creditors than the residual claimants that are the typical recipients of fiduciary duties, and that the public – and current and future taxpayers specifically – are the true residual risk bearers for public pension funds. This reframing of fiduciary duties in public funds has dramatic consequences for the investment policies of the funds. Most importantly, a shift in the locus of fiduciary duties to public wealth maximization will require fund managers to more fully consider the externalities accompanying their investments, which should serve to help them fully and accurately price their investments …

Paul Rose, ‘Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds’, 2018 University of Illinois Law Review 891.

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