Pension funds are currently among the only way less-affluent Americans can get exposure to hedge and private equity funds. This may be changing. As part of the broader effort of Trumpian minions to get all of the deregulating that they can in before Jan. 21, 2021, Jay Clayton—in addition to letting as many hedge funds as possible keep as many of their investments as possible secret—is racing to give as many people access to alternative investments as possible, regardless of the wisdom of doing so. Simultaneously, the Labor Department has opened the doors even further, allowing 401(k) plans to include private equity funds.
Given this drive to allow as many people as possible to pay as many fees as possible to the tax-dodging paper-pushers, it seems as good a time as any to check in with the people already doing it on behalf of working Americans and how they feel about their hedge fund and private equity portfolios.
The Arkansas Teacher Retirement System is suing investment and insurance giant Allianz for allegedly losing $774 million of the pension’s money in its volatility-trading funds…. “Active management missteps” and a “profound breakdown in risk management” caused the Allianz funds’ “extremely disappointing” results, ATRS’s consultant Aon told the pension fund in an analysis, according to the lawsuit. Aon “chastised AllianzGI for a ‘lack of transparency into the events that unfolded,’ which ‘perpetuated… lost confidence in the risk management process’ and a loss of ‘trust in the investment team.’ Moreover, AllianzGI has refused to explain to ATRS the investment decisions that led to the implosion of the Alpha funds.”
The state of Kentucky has sued Blackstone and KKR, demanding compensation and punitive damages over hedge fund investments that were deemed disappointing but generated “excessive fees”…. The state contends the hedge funds “did not lower risk, reduce illiquidity, or generate sufficient returns . . . [but] did generate excessive fees”. The Wall Street firms “targeted underfunded public pension funds”, according to the complaint, seeing them as potential buyers of hedge fund vehicles the state now calls “exotic” and “unsuitable”.
Perhaps it should have just invested in Blackstone itself.
Blackstone said Thursday that it posted net income of $568.3 million, or 81 cents a share, for the second quarter. That compares with a profit of $305.8 million, or 45 cents, a year earlier…. Blackstone distributed $590 million through dividends and share repurchases during the quarter.
Teachers’ Pension Lost $774M in Allianz Volatility Funds: Lawsuit [II]
Kentucky sues Blackstone and KKR over fund performance [FT]
Blackstone’s Earnings Rebound with Market Surge [WSJ]