A major teachers' union says public pension investment in hedge funds is a bad bet.
Speaking to an Illinois House panel Thursday, study co-author Elizabeth Parisian of the American Federation of Teachers said, “Our analysis suggested that hedge funds failed to provide the eleven pension funds we studied with superior returns as promised. At the same time, hedge funds collected fees that are in no way justified by performance.”
And the hedge fund managers exploit a loophole, said co-author Saqib Bhatti of Roosevelt Institute, that allows their income to be taxed at the lower capital-gains rate. “That's why Ken Griffin, who runs Citadel here in Illinois, can pay a lower tax rate than does the janitor that cleans his office.”
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Someone's ears might be burning. The super-rich Griffin is described as Gov. Bruce Rauner's best friend and top benefactor.
Teachers Retirement Fund executive director Dick Ingram says it's not as bad as Parisian would have you believe. “Our investment in hedge funds has helped us accomplish what we want to do: deliver well above average returns over a long term – with less than average risk.”
They all spoke to the Illinois House Revenue and Finance Committee. The study is titled “All That Glitters Is Not Gold.”