Three Ohio public pension funds earned $1.6 billion (£1.31 billion) less than they might have if they’d stayed out of hedge fund investments while still paying $1.1 billion (£0.90 billion) in fees for the privilege, according to a new report released Monday.
Many pension funds nationally turned to hedge funds in hopes of recouping some of the losses experienced in the last recession and to diversify their investment portfolios. Hedge funds are lightly regulated, pooled funds that target alternative investments in hopes of providing stronger, more consistent returns.
But an Ohio-specific update to a national study released last year determined that hedge funds have underperformed compared to more traditional investments, particularly when the funds’ higher fees are factored in.
President of the Ohio Federation of Teachers, Melissa Cropper said, “We are very concerned about hedge-fund billionaires using our deferred wages to enrich themselves while we’re worried about whether we’ll be able to retire with dignity”.
Melissa added, “After losing between 20 to 25 per cent of their value during the Great Recession, three of Ohio’s largest pension funds had to impose painful changes on working people by increasing the retirement age and hiking up employee contributions”.