Managers of Pennsylvania’s two pension systems say they have no plans to change their investment strategies to oblige Pennsylvania’s top fiscal watchdog.
Auditor General Eugene DePasquale has urged them to pull the $7.6 billion they’ve invested in hedge funds. The hedge funds involve too much potential risk and high costs to be suitable for pension investments ultimately insured by taxpayers, he said.
DePasquale said he was spurred into action by the recent announcement that the nation’s largest pension plan, in California, will pull out of hedge funds due to their complexity and fees.But his warning was met with a collective shrug from the state’s two pension systems, which have invested about a 10th of the two systems’ total holdings in the funds.
California’s pension system was far less invested, with $4.5 billion out of $300 billion in hedge funds.
DePasquale, who said he doesn’t expect action right away, wants to encourage more scrutiny of investment strategies at Pennsylvania’s pension funds.
The state owes about $50 billion its pension systems, and the debt is expected to rise.