Not Hedging Their Pensions

In a strong signal to the hedge funds that have profited from raiding public pension funds, the board of the New York City Employees Retirement System (NYCERS), the city's largest pension fund, voted to liquidate its $1.7 billion in hedge fund assets in an orderly manner. NYCERS has a total of $51.2 billion in their pension fund. The city's public pension funds have some $154 billion in total assets, managed independently under five separate funds. The move by the NYCERS follows a decision by the California Public Employees Retirement System (CALPERS) -- the nations largest public pension fund---to pull out of hedge funds.

New York City's public advocate Letitia James said, "Hedge funds are charging exorbitant fees for high-risk and opaque investments," with NYCERS paying $40 million in fees to hedge funds in 2015 alone. The performance of hedge funds has not kept pace with other investment options, and the high-risk associated with their investments made the pension fund managers concerned. Then, too, there's the reputation of many hedge fund managers for their free-spending life styles. As James noted,

"Hedges have underperformed, costing us millions. Let them sell their summer homes and jets, and return those fees to their investors."