4 ms·

Please detail how hedge funds exploit pension funds.

by whatok 10y ago

danieltillett 10y ago
The major investors in hedge funds are pension funds. Every dollar paid in "salary" to some hedge fund manager is a dollar out of someone's retirement.
- whatok 10y ago
  So these magical hedge funds are so powerful that they can force people to invest in them?
  - Strom 10y ago
    I'm not sure about these specific ones or how the law is in the US, but in Estonia where I live, you are indeed required by law to invest 4% of your pay into pension funds. The high management fees are a major criticism point of this system.
  - danieltillett 10y ago
    You as the beneficiary of (most) pension funds don't get to choose where your investments are placed. There is a massive agency problem with the people running pension funds paying out billions to hedge fund managers - especially when they know (or should know) that hedge funds don't add value across the entire investment industry.
    - whatok 10y ago
      You as the beneficiary of a pension fund absolutely can exert influence over the investment committee of the pension fund. If there is a process in place for remedying a problem like this, how does it become another party's fault? Additionally, if the claim that "hedge funds do not add value across the entire investment industry" is true, are these pension fund employees not in some sort of violation of fiduciary duty?
      - danieltillett 10y ago
        I have no influence over my pension fund. Pension funds as a whole are so widely invested in the market that there is no way that a hedge fund can provide an overall return. All hedge funds are a complex way of robbing Paul to pay Peter at the pension fund level.
- jordanthoms 10y ago
  Pension funds are run by big boys also (in fact they are much larger), if they think they can get better returns elsewhere they are free to move their funds there.
  - deleted 10y ago
    [deleted]
tluyben2 10y ago
Pensions could've been higher if they didn't take that much out? Not sure how OP meant it but that's what I feel; same when CEO's take obscene salaries; the employees could've been paid better if she/he didn't take that kind of money. It seems obscene anyway; I can see you want to secure your future by taking enough millions (depends on where you live how many) to do that even though you make enough per month to live comfortably. I cannot see, unless (like Griffin does by the way) you have a higher plan, how taking more is better than flowing it back to employees or the actual purpose of your company (which in this case is pensions)?
- Nrsolis 10y ago
  You completely misunderstand how this works. They only make $1 billion if the fund makes $5 billion that year. So they aren't taking anything from the fund. They are investing the money wisely, growing it, and sharing in the gains. It doesn't get more "fair" than that.
  - tluyben2 10y ago
    Sharing the gains... If one guy makes $1 billion that is called sharing? I don't misunderstand how it works; I find it obscene, that's all.
- deleted 10y ago
  [deleted]
- neilc 10y ago
  > Pensions could've been higher if they didn't take that much out Pensions would also be lower if they were invested in funds that made lower or negative returns. The theory (right or wrong) is that the high fees charged by the hedge funds are justified because they provide better risk-adjusted returns than other investment vehicles. Hedge funds may be bad and their CEOs may be overcompensated, but it is more complicated than just "every dollar paid to Kenneth Griffin is a dollar taken from a pension fund."
  - tluyben2 10y ago

Please detail how hedge funds exploit pension funds.

by whatok 10y ago

Please detail how hedge funds exploit pension funds.

The major investors in hedge funds are pension funds. Every dollar paid in "salary" to some hedge fund manager is a dollar out of someone's retirement.

whatok 10y ago
So these magical hedge funds are so powerful that they can force people to invest in them?
- Strom 10y ago
  I'm not sure about these specific ones or how the law is in the US, but in Estonia where I live, you are indeed required by law to invest 4% of your pay into pension funds. The high management fees are a major criticism point of this system.
- danieltillett 10y ago
  You as the beneficiary of (most) pension funds don't get to choose where your investments are placed. There is a massive agency problem with the people running pension funds paying out billions to hedge fund managers - especially when they know (or should know) that hedge funds don't add value across the entire investment industry.
  - whatok 10y ago
    You as the beneficiary of a pension fund absolutely can exert influence over the investment committee of the pension fund. If there is a process in place for remedying a problem like this, how does it become another party's fault? Additionally, if the claim that "hedge funds do not add value across the entire investment industry" is true, are these pension fund employees not in some sort of violation of fiduciary duty?
    - danieltillett 10y ago
      I have no influence over my pension fund. Pension funds as a whole are so widely invested in the market that there is no way that a hedge fund can provide an overall return. All hedge funds are a complex way of robbing Paul to pay Peter at the pension fund level.
jordanthoms 10y ago
Pension funds are run by big boys also (in fact they are much larger), if they think they can get better returns elsewhere they are free to move their funds there.
- deleted 10y ago
  [deleted]

tluyben2 10y ago

Pensions could've been higher if they didn't take that much out? Not sure how OP meant it but that's what I feel; same when CEO's take obscene salaries; the employees could've been paid better if she/he didn't take that kind of money. It seems obscene anyway; I can see you want to secure your future by taking enough millions (depends on where you live how many) to do that even though you make enough per month to live comfortably. I cannot see, unless (like Griffin does by the way) you have a higher plan, how taking more is better than flowing it back to employees or the actual purpose of your company (which in this case is pensions)?

Nrsolis 10y ago
You completely misunderstand how this works. They only make $1 billion if the fund makes $5 billion that year. So they aren't taking anything from the fund. They are investing the money wisely, growing it, and sharing in the gains. It doesn't get more "fair" than that.
- tluyben2 10y ago
  Sharing the gains... If one guy makes $1 billion that is called sharing? I don't misunderstand how it works; I find it obscene, that's all.
deleted 10y ago
[deleted]
neilc 10y ago
> Pensions could've been higher if they didn't take that much out Pensions would also be lower if they were invested in funds that made lower or negative returns. The theory (right or wrong) is that the high fees charged by the hedge funds are justified because they provide better risk-adjusted returns than other investment vehicles. Hedge funds may be bad and their CEOs may be overcompensated, but it is more complicated than just "every dollar paid to Kenneth Griffin is a dollar taken from a pension fund."
- tluyben2 10y ago