{"id":177144,"date":"2019-12-12T20:19:00","date_gmt":"2019-12-13T01:19:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2019\/12\/12\/pennsylvania-pushes-back-against-hedge-fund-looting\/"},"modified":"2019-12-12T20:19:00","modified_gmt":"2019-12-13T01:19:00","slug":"pennsylvania-pushes-back-against-hedge-fund-looting","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2019\/12\/12\/pennsylvania-pushes-back-against-hedge-fund-looting\/","title":{"rendered":"Pennsylvania Pushes Back Against Hedge Fund Looting"},"content":{"rendered":"

The State Treasurer has taken a look at the hedge funds, and the state are moving to simpler financial instruments<\/a>, which have far lower fees, and actually perform at least as well.<\/p>\n

Of course, low fee funds don’t have the money to spend on political donations, so I do wonder how long it will be until the state legislature starts pushing back over this:<\/p>\n

Pennsylvania Treasurer Joe Torsella<\/a> last month told the world he\u2019d pulled the state\u2019s money \u2014 or at least the slice he oversees \u2014 \u201cout of all so-called hedge-fund investments, resulting in [over] $14 million in annual fee saving.\u201d <\/p>\n

The claim sounded familiar. I looked it up, and sure enough Torsella had announced back in April 2017 that he was moving $2.4 billion<\/a> in state funds away from private investment managers into a \u201cpassive investment strategy, saving an estimated $5 million per year in fees.\u201d <\/p>\n

The 2017 purge was against \u201cactively managed\u201d stock investors. This fall\u2019s move, dumping nearly $500 million out of hedge funds, was \u201cthe next installment,\u201d Torsella spokeswoman Ashley Matthews told me. <\/p>\n

This was smaller than the stocks move (just one-fifth of the assets), but also bigger (almost three times the fee savings). <\/p>\n

The move reflects Torsella\u2019s long-held position to put more state pension money in low-cost index funds while avoiding high-fee hedge funds. <\/p>\n

Through a company called Aksia, a \u201cfund-of-funds” manager hired under Torsella\u2019s predecessor Rob McCord<\/a>, Pennsylvania employed more than 50 hedge funds \u2014 such big firms as BlackRock D.E. Shaw, and Philadelphia\u2019s PFM, as well as more obscure investors in a web of hedging strategies \u2014 to invest a slice of Pennsylvania families\u2019 Tuition Assistance Program (TAP) money.<\/p>\n

What does the record show? Since 2013, Aksia and its funds were paid more than $100 million by the Pennsylvania treasury \u2014 $15 million a year \u2014 in fees and shared profits (\u201ccarried interest\u201d), for managing that not-quite-$500 million.<\/p>\n

How\u2019d they do? According to Treasury data, after paying those fees, the hedge funds returned an average of less than 4 percent a year over those 6\u00bd years. That is less than the college savings plans\u2019 long-term target for all investments, which is 6 percent a year.<\/span><\/p><\/blockquote>\n

This is an unalloyed good.<\/p>\n

First it means that the taxpayers of the state of Pennsylvania are no longer being ripped off, and second,  it represents a claw-back of power and money from Wall Street.<\/p>\n","protected":false},"excerpt":{"rendered":"

The State Treasurer has taken a look at the hedge funds, and the state are moving to simpler financial instruments, which have far lower fees, and actually perform at least as well. Of course, low fee funds don’t have the money to spend on political donations, so I do wonder how long it will be …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[446,456,439],"class_list":["post-177144","post","type-post","status-publish","format-standard","hentry","tag-budget","tag-finance","tag-government"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/177144"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=177144"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/177144\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=177144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=177144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=177144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}