City Finance Director Norman Foster, who has been a voice for skepticism on the NOMERS board, questioned whether the pension fund, anyone else for that matter, could predict the future.
In the 1990s, a Mesirow fund of funds saw returns in the single digits when massively overvalued tech startups tanked. Whose to say the current fund wont tank in a similar way, Foster said.
Snapchat, as a privately held company, doesn't have to disclose much about its business, so not clear what, if any, revenue stream it has. It's a free service that doesn't even, as yet, sell much advertising. The company's gaudy valuation is based entirely on the assumption that the it will be able to monazite its user network, which is estimated to be in the hundreds of millions.
"How much was Snapchat valued at," Foster asked.
"Nineteen billion," DeBolt replied.
"And how much revenue did it make last year," Foster continued.
DeBolt demurred. "That's confidential, but you can guess that it's a pretty small number."
If that's not a bubble, Foster said, then nothing is.
Pension funds should never ever ever be invested in high risk tech stocks like this. Unless the goal is to end up with decades long lawsuits on their hands, like this one. Or unless you don't actually care whether or not the fund can support pensions over the long term which is probably the case.