Are Hedge Funds Safe For Pensions?
According to a Mercer Investment Consulting study- 1/3 of pension funds invest in hedge funds. But are they safe investments? On today’s "Street Signs" CNBC's Erin Burnett put that question to Damon Silvers, Associate General Counsel with the AFL-CIO -- and Cynthia Steer, Managing Director and Chief Research Strategist with CRA Rogers Casey.
Silvers said hedge funds are like a number of other risky investments – they are appropriate in small amounts. The problem, he said, is the regulatory framework has been weakened, first by the courts that knocked down the SEC rules requiring hedge fund registration – and then by the U.S. Congress that weakened IHRSA protection over pension money in hedge funds
Erin then asked just what is an inappropriate amount for a pension fund in a hedge fund? How do you pick the number?
Silvers explained there is no number.. you have to look at each fund. If a small percentage is in exotic strategies, that might be okay… But when you get around 15 – 20% level – you really have to take a closer look..
Cynthia Steer said that a greater amount of due diligence is needed when considering hedge funds for pensions. And she added it always seems that 20% of your assets take 80% of your time!