Pension Funds Getting Out of Hedge Funds

While the Texas Municipal Retirement System (TMRS) is increasing its investment in Hedge funds and Private Equity funds, other pension funds are reducing their investments because of high fees and opaqueness in their reporting of expenses. The front page story in the WSJ describes how the American Federation of Teachers advocates divesting teachers pension investments in Hedge funds.  In fact, many pension funds have already reduced their investments.

Similar actions are taking place with respect to Private Equity funds because of the high expenses which are usually hidden from pension managers.  For example, one Private Equity fund with twenty employees and three private jets, purchased a company and told the newly purchased company to pay for all the costs of the private jet aircraft.  These costs were then charged off as expenses and subtracted from the net income reported to the pension fund.

This is definitely not the kind of investments that Georgetown's pensions should be invested in.