(Bloomberg) -- Syndicated columnist David Sirota is on a mission to prevent public pension funds from investing in “alternative assets” such as private-equity and hedge funds.
In Salon this month, Sirota criticized these investments as “a transfer of retirement income to Wall Street.” In another column responding to a piece I wrote defending pension-fund investment in such alternatives, he characterized the practice as “con artistry.”
He’s aiming at a big target. For more than a decade, public pension funds have been increasingly seeking returns from alternative investments. One of the earliest and biggest investors is the California State Teachers’ Retirement System, the second-largest U.S. pension fund at $170 billion in assets. According to the Calstrs website, it has committed $40 billion to private-equity managers.
Calstrs portrays this strategy as highly successful. According to the pension fund’s website, its private-equity portfolio has generated a net return of 11.26 percent a year, far surpassing its 7.5 percent objective. Sirota, however, doesn’t trust those numbers.
“Alternative investments are shrouded in secrecy, thus calling into question such vague claims of success,” he wrote at Nsfwcorp.com.
“The scattered bits of crystal clear evidence we do have about ‘alternative investments’ show that while they have been a boon for Wall Street, they can be a financial disaster for retirees,” he added. “In Pennsylvania, for instance, the state pension’s investment in hedge funds forces retirees to pay a whopping $770 million in fees every single year.”
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