How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by bedhead on Monday October 22, 2018 @08:49AM (#18274172)

Kentucky's pension is screwed for all of the same reasons many other public pensions are (in order of importance):

- Overpromising of benefits

- Underfunding mechanisms that allow deferral of contributions

- General mismanagement (I can assure you the best and brightest investors and fiduciaries don't work at public pensions)

- Corruption (ie related party deals)

The idea that "evil hedge funds" are responsible is silly. This might make for more clicks but the investment committee made the decisions to invest, so blame them. This isn't about hedge funds.

I've long argued that public pensions should be illegal. There are too many areas of interest misalignment. Things that can be abused, will, and public pensions are perfectly designed to facilitate these kinds of shenanigans. Anyone looking for what the next great crisis will be, this is it.

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by ciamac on Monday October 22, 2018 @09:21AM (#18274387)

Well the direct mechanism in this case is hedge funds paying "placement agents" which fund the corruption, so they do have responsibility, even if they are not solely responsible.

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by bedhead on Monday October 22, 2018 @09:35AM (#18274488)

The placement agent would be powerless if not for the pension board's incompetence and corruption, otherwise it wouldn't matter if the pension was being pitched by the marketer or the fund manager itself. Don't get me wrong, it's a game that hedge funds are playing and I despise it, but the disease is what goes on in the board room of the pension.

All of this is a sideshow to the egregious overpromising of benefits and underfunding mechanisms.

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by ip26 on Monday October 22, 2018 @11:50AM (#18275660)

This sounds like the same debate we have about security. But sir, said the fox. I am innocent! For the hen coop was left unlocked!

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by SilasX on Monday October 22, 2018 @11:21AM (#18275344)

>General mismanagement (I can assure you the best and brightest investors and fiduciaries don't work at public pensions)

You don't really need "the best of the best" to run a public pension; you're not trying to outsmart the markets with some super-clever arbitrage. You just need to invest in the right balance of index funds.

If you need the very best people not to raid the pension because it had one good year when the markets were up, we're all screwed.

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by bedhead on Monday October 22, 2018 @11:43AM (#18275583)

I would agree...and many of these pension boards are so bad they can't even to that.

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by matthewdgreen on Monday October 22, 2018 @09:39AM (#18274531)

Except that the article isn't about any of those things. It's about a very specific set of abuses related to hedge funds.

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Re:How a Gang of Hedge Funders Strip-Mined Kentucky’s Public... by gameswithgo on Monday October 22, 2018 @09:54AM (#18274641)

>There are too many areas of interest misalignment. Things that can be abused, will, and public pensions are perfectly designed to facilitate these kinds of shenanigans.

probably hedge funds, banks, loans, short selling, maybe even stock markets in general should also be illegal then for those same reasons?

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