Warning: Hedge Funds are Taking Your Pension Down With Them!

2 de julio de 2007

<body><div id="article"><p>July 2, 2007 (LPAC)--The International Trade Union Confederation (ITUC) released a report June 22 to its members in 153 countries, urging them to pull their pension funds' investments out of hedge funds and private equity funds.</p><p>On June 30, the pensions' suicidal gambling reached a high point when the Ontario Teachers Pension Plan threw roughly $4 billion of its $100 billion assets into a leveraged takeover of Canada's biggest telecom company, by two private-equity "locust funds"--loading up the company with $25 billion in new debt in the process.</p><p>The ITUC, with many examples, showed that pension funds' returns from investing in these locust funds have done no better, or lagged behind, ordinary stock market investments: in the case of private-equity-fund investments, for nearly a decade; and in the case of investment in hedge funds, since 2005. It also warned that private-equity takeovers--heavily using pension funds' invested assets--have been shrinking the stock markets for public stocks into which pension funds have traditionally been invested; that they pit older workers' interests against those of younger workers in the pension plans; and that the debt bubbles these funds are building up, are threatening a collapse of financial markets "as soon as credit conditions change."</p><p>Credit conditions are now rapidly changing for the worse, and pension funds--with between 3% and 5% of their investments in hedge funds alone, depending on the report--are directly in the path of disaster. In the past two years, many public pension funds in the United States have added to their hedge-fund investments, their own direct purchase of the super-risky mortgage-backed securities (MBS) and their derivative collateralized debt obligations (CDOs) with which hedge funds and investment banks play. Analysts at real estate investment trusts and banks, warn that the huge losses seen coming in these housing-bubble securities (losses in the hundreds of billions of dollars) are going to create a second-wave pension crisis in the United States.</p></div></body>