It's a nice thought. Maryland's ~$30 billion pension fund can supercharge the state's economy by disproportionately investing in Maryland. The wonks call it "home bias," and a couple academics at Northwestern find that it's pretty prevalent among state pension funds.

But they also find that the homer investments do a disservice to pensioners by significantly lagging behind the performance of other investments. And states with home-bias pension funds also tend to be states with high levels of corruption. Investment by Maryland's retirement system in Maryland companies, however, is quite modest. HT to Marylandreporter.com's Megan Poinski, who blogs about the study here.

From the paper's abstract:

Public pension funds’ own-state investments perform significantly worse than their out-of-state investments, an average of 3-4 percentage points of net IRR per year, and those that that overweight their portfolios towards home-state investments also perform worse overall. These underperformance patterns are not evident for other types of institutional investors, such as endowments, foundations and corporate pension funds. Overweighting in home state investments by public pension funds is greater in states with higher levels of corruption, although there is no positive correlation of underperformance with corruption for these investors. The overweighting and underperformance of local investments cost public pension funds between $0.9 and $1.2 billion per year, depending on the benchmark.