Pension Plans Pull Out of Hedge Funds

$4 billion. That’s how much investment the California Public Employees’ Retirement System, the largest U.S. public pension plan, is pulling out of hedge funds over the next year. The second largest U.S. public pension plan, the California State Teachers’ Retirement System, is reviewing its hedge fund investment of $700 million, which earned 0.13% last year, the lowest of all its asset classes. Public pensions moved into hedge funds with the idea that larger gains would avoid the need for bigger contributions from their employee-members and prevent the reduction of retirees’ benefits. It hasn’t worked out that way. Hedge funds have underperformed the S&P 500 stock index for the past five years, and hedge fund fees are high. Investments that focus solely on profit are turning out to be less than profitable.

John Howell, Editorial Director 

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