This morning's news indicates that the Madoff Fund crisis may have been even more far-reaching effect than we thought even a few days ago. Why? This morning's news suggests that several pension funds ignored the tried-and-true principle of diversifying risk by spreading their investments across various asset classes and management companies. Several pension funds have now admitted that they invested their entire funds in a single management company -- Madoff's. Now, their pension dependents have lost their entire retirement, and the government's pension guarantee fund will be forced to foot the bill.
If there is any good news at all in this, it is that the pension funds involved have been relatively small. However, that is small consolation for pensioners whose life savings have been compromised, because the government guarantees will reduce their benefits substantially.
