Pension Funds Double Down as Losses Mount

Public pension funds are reporting a large increase in their alternative asset class weightings as portfolio performances continue to suffer.  Public funds control over $2.45 trillion in assets and are increasing their portfolios risk levels, largely with increased investments in hedge funds, in an attempt to compensate for losses.  Hedge funds have reported their largest losses year to date in at least eighteen years with an average negative return of 3.5% according to Hedge Fund Research Inc.'s composite index. 

Public funds are placing investor capital at risk while a nonprofit public policy group estimated that at the end of 2007, states were short $361 billion in pension payments scheduled over the next 30 years.  South Carolina's retirement system announced in February that they were increasing their asset weighting in hedge funds to 45%; an increase from zero 18 months ago. 

While public funds are down an estimated 5.1% year to date since the end of June, fund companies and managers may be overreacting.  The average performance may be below the risk-free rate of return measured by the ten year Treasury bond, but it is also outperforming the negative 12% year to date return of the S&P 500 index.  Pension funds are traditionally employed to create stable growth over the long term.  However, managers may be taking on excessive risk; a risk of further loss that many investors aren't prepared for. 

See Bloomberg: States Double Down on Hedge Funds as Returns Slide

Comments

[MarkMedayski:]

You are right Jewish boy,bravo!
The markets are made to gamble and hedge funds are the native animals of this,let all american investors money go to hedge funds,at least losses/profits will be real not cover ups we have in the Dow Jones,SP500,Nasdaq stocks that are meant to enrich insiders.
Let the hedge funds manipulate the market,not insiders and their long cronies list,at least hedge funds share profits with you.

2008 Aug 15 08:07 AM

[Octogenarian:]

But they are doing much better than S&P, if the numbers were not fudged. I'll bet they are worst than stated.

2008 Aug 15 10:31 AM

[adan:]

on target: "...managers may be taking on excessive risk; a risk of further loss that many investors aren't prepared for. " -

taxpayers should

* force laws saying their pensions shouldn't be in anything other than treasuries -

* that returns be factored as per the going interest rates -

* and claim the same kind of leverage foreign countries supposedly have owning so many of our treasuries

just an idea, own our own government ?

2008 Aug 15 01:09 PM

[notsosmart:]

nothing fair is going to happen. fair is not a word for these games & the phony papers created to fleece you.other words not applicable-ethics,trut... market,& capitalism.goldilocks may dissapear for awhile also.

2008 Aug 15 02:47 PM

[notsosmart:]

re above-truth,honesty,fr... market.

2008 Aug 15 02:48 PM

[notsosmart:]

re above-free market. trouble publishing

2008 Aug 15 02:49 PM

[moneysurf:]

Pension funds should not be invested in any thing else other than govt securities.

2008 Aug 15 05:03 PM