HEDGE FUNDS

THE CHALLENGE

A Financial Times analysis[1] of industry data found that at the start of 2008, public pension plans held about $380 billion with hedge funds, and gave a further $70 billion to the industry to invest over the following six and a half years. For this, the pension funds received about $95 billion in investment gains, based on the performance of the average hedge fund. The hedge funds themselves took about $68 billion in fees for managing the money.

This equated to public sector pension plans paying about 72 cents for every dollar of investment gain they got back from hedge funds between the start of 2008 and mid-2014.

THE RESPONSE

RESOLVED, that the AFT Trustee Council encourage each of its member trustees and pension funds to determine the following hedge fund information, in furtherance of their fiduciary duty to regularly monitor their plan investments (recently reaffirmed in a unanimous Supreme Court decision, Tibble v. Edison International).

• Full disclosure of all hedge fund fees, compared to net hedge fund returns.
• Analysis of hedge fund delivery of promised benefits, compared to low-cost alternatives.
• Zero tolerance for “pay to play”—political or charitable contributions connected to investment management of pension assets.