US GAO Recommending More Guidance For Pension Funds

As pension funds look for ways to increase return, and adjust to the changing markets, the GAO is recommending more guidance as they begin to invest more in alternative investments, such as hedge funds and private equity (see Reuters article). While there is always worry of over-stepping when Congress gets involved, the trends are real and will most likely cause more concern going forward given the lower level of transparency for alternative investments. Whether future restrictions and regulations will impose a greater cost burden on such funds is yet to be seen. Of interest, data shows mid- and large-size funds to have between 21 and 27 percent investment in hedge funds, and more than 40 percent in private equity. These trends are not unlike those seen at various academic endowments (see previous post). It would not surprise me if more individuals begin exploring these investment areas as related products start to become available to retail investors.