Again, if rich individuals want to make poor and expensive decisions with their money, that's fine. But I think it's bad that pensions and endowments get snookered in by the sales job that high fee active management does anything but enrich the fund manager. It's a shame that the people entrusted with the public's money are incompetent and unsavvy enough to buy into the claims and pay such monster fees.
I never suggested that there should be regulation to prevent pension funds from investing in high fee funds. But since you keep raising the idea, I'm not immediately opposed to it either. I was just lamenting the waste, which will eventually come out of our pockets.
I don't think that's fair, you highlighted the
7% loss in your original post, not the amount he was paid.
Agreed, the waste is stupid, and may be borne by us as taxpayers (or younger state employees). I just don't see a workable solution, unless they are not warned up front (they are) or are lied to (obviously a bad thing we have securities fraud laws for) or forced to invest (they're not, they send their money of their own free will after a multi-month analysis). U.S. states are all over their pension funds and require all sort of reporting and risk management and representations from funds they invest in. It wasn't always true, but it definitely is now. It doesn't really guarantee returns. I think that, honestly, investors who don't have full staffs evaluating the risk don't really have business in a lot of the alternative investment space. Of course they're between a rock and a hard place (see Christie refusing to fund NJ's Common Pension fund for 2? 3? years) and if they don't produce returns, they're in hot water, so you can see why they're interested.
Most states have wised up to this, though. Large public institutional investors have largely cut hedge fund investments out of their portfolio. CalPERS killed their hedge fund program 18 months ago, for example, as a gold standard. When there's enough pushback, states do bend.