Over the last few decades, U.S. public pension funds have moved away from traditional stocks and bonds and toward so-called “alternative investments”, including hedge funds and private equity firms. Most public pensions now have nearly a quarter of their portfolio invested in these private funds. The funds themselves are not as transparent, regulated, or stable as public companies, and their fees are significantly higher. They also invest in dubious industries, like gun manufacturing, immigrant detention, and vulture funds preying on Puerto Rico.

In return for not asking questions, they have promised cash-strapped states incredibly high returns, which they have generally not delivered. And “investors can lose money even as fund managers line their pockets.” As a result of chronic under-funding, high fees, and the funds under-performing the stock market, a growing number of states’ pension funds are now in crisis, and legislatures and governors are asking public employees, teachers, and taxpayers to bail them out.

Teachers, retirees, and citizens in some of the affected states are growing wise and starting to sound the alarm:


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“The 2019 Election That Should Have Hedge Funds And Wall Street Worried: A candidate in Kentucky vows to expose the nation’s worst public pension system in a way that could reveal corruption everywhere.” by Travis Waldron, Huffington Post, April 28, 2019.

“Private Prisons and Investment Risks, Part 2: How Private Companies Fuel Mass Incarceration—and How Public Pension Funds Are at Risk”, by American Federation of Teachers, February 2019.

Private Prisons, Immigrant Detention and Investment Risks”, by American Federation of Teachers, August 2018.

“The Big Squeeze: How Money Managers’ Fees Crush State Budgets and Workers’ Retirement Hopes,” by American Federation of Teachers, May 2017.

All That Glitters Is Not Gold: An Analysis of U.S. Public Pension Investments in Hedge Funds,” by Elizabeth Parisian, AFT, and Saqib Bhatti, Roosevelt Institute, Refund America Project, Haas Institute, 2015.

Pennsylvania Pension Fund Paid $1 Billion in Fees to Managers,” by Janet Lorin, Bloomberg, December 20, 2018.