Top of Mind
The $298 billion California public pension system is getting out of hedge funds “as part of an ongoing effort to reduce complexity and costs in its investment program.” In a Bloomberg View column, Barry Ritholtz points out that many pension funds accepted the high costs of hedge funds in hopes of reliably higher returns, which could cover funding gaps. “The expectation that hedge-fund returns will exceed those of equities is an unsupported fiction,” Ritholtz writes. For the pension funds, “[t]his short-term patch is setting up much bigger shortfalls in the future.”
Yale Insights talked with Ranji Nagaswami ’86 about the origins of public pensions crisis and potential solutions.