(Bloomberg) Hedge funds have accumulated $3 trillion, with a substantial portion of it coming from public pensions. That these funds don’t deliver outperformance is almost beside the point. What they are selling is an inflated estimate of expected returns. This serves a crucial purpose for elected officials, letting them lower the annual contributions states and municipalities must make to the pension plans for government employees. It is a dodge that everyone goes along with. When the bill comes due in a few decades, this will cost taxpayers a bundle.
Hedge-Fund Mediocrity Is the Best Magic Trick
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