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Housing Detour: The Pension Fund Eyes a Dubious Investment 

Wednesday, May 21 2014

Pension funds are both remarkably byzantine and remarkably simple. For all their complexity, their purpose is to make money, fund pensions, and avoid vacuuming cash from the city's general fund — and that's pretty much it.

City politicos, however, have suggested tapping San Francisco's $13 billion fund to construct below-market-rate real estate. This is a move applauded by Victor Makras, president of the pension trust's board — and, notably, president of Makras Real Estate.

Intuitively, using a pension fund as something other than a money-generator tends to generate less money. Siphoning pension funds into affordable housing "completely undercuts what a pension plan is supposed to be about," says former Securities and Exchange Commission chief economist Chester Spatt, now a Carnegie Mellon professor. "Pension funds are not slush funds for politicians — or people politicians create."

Numerous academic studies have indicated that pension boards elected by the fund's beneficiaries tend to generate more than those stocked with political appointees making political decisions — and, perhaps, benefiting from them.

San Francisco's pension board features both elected and appointed trustees. Both are bound by the city charter and state constitution to act "solely for the benefit of the active members and retired members of the Retirement System and their survivors and beneficiaries." Failure to do so could result in individual trustees being sued by irate pensioners — and scolded by economists.

About The Author

Joe Eskenazi

Joe Eskenazi

Joe Eskenazi was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. "Your humble narrator" was a staff writer and columnist for SF Weekly from 2007 to 2015. He resides in the Excelsior with his wife, 4.3 miles from his birthplace and 5,474 from hers.


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