This Small-Town Pension Fund Has a Warning for Millions of Retirement Savers

If you think cashing out of a private fund is easy, just ask a guy who used to manage $750 billion…

This is a column about an investment of less than $1 million by a piddly little pension fund.

Why should you care?

Because the travails of the pension plan are a harbinger of the problems millions of individual investors might soon be confronting—and because a man who was formerly one of the most powerful people in the investment world sees what’s wrong but so far hasn’t been able to fix it.

Robert Auwaerter is vice mayor of Indian River Shores, Fla. That’s a small town (population approximately 4,000), less than 90 miles north of West Palm Beach. Auwaerter has been advising the board of trustees at the pension plan for the town’s public-safety workers and firefighters. The pension fund has about $21 million in total assets, which is peanuts for Auwaerter, who used to manage hundreds of billions of dollars in bond funds at Vanguard.

Nearly all the pension plan’s assets are in publicly traded stocks and bonds. Roughly 4%, however—a bit above $800,000—is invested in the U.S. Real Estate Investment Fund, a nontraded portfolio of commercial real estate with more than $8.3 billion in net assets. The fund is managed by Intercontinental Real Estate, an investment firm in Boston that runs about $12.6 billion in real-estate funds, according to its latest regulatory disclosure.