Why Publics Should Not Blame Hedge Funds We have all heard the news that CalPERS, New York State Common, and Illinois State Board of Investment are reducing or even eliminating their hedge fund allocations. The stated reasons largely center on poor investment returns combined with indignation on fees. In particular, over the weekend the well-meaning new chair of the Illinois State Board of Investment cited paying hedge funds $180 million over the last three years, with underwhelming results. The fees were especially galling given the plan’s 40% funding ratio. Let’s agree upfront—the hedge fund industry has invited criticism by not constructing a fee structure better aligned with client interests—especially in a zero interest rate environment. That is a topic for a different day. . . .
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