The State Employees Association of North Carolina is calling on state Treasurer Janet Cowell to withdraw all investments in hedge funds immediately in light of the same move by the California Public Employees Retirement System (CalPERS), the nation’s largest pension fund, Monday.

CalPERS plans to eliminate all $4 billion of its hedge fund investments over the next year.  The impact of this action could potentially lead to a “run on the bank,” with other pension funds and investors pulling out of the now $2.8 trillion hedge fund industry.

If North Carolina waits until other investors have taken their money and assets are devalued, state employees and retirees could lose even more than they already have by being in these risky investments.

“Other institutional investors around the world could potentially follow CalPERS’ lead and finally dump these high-risk funds,” said SEANC Executive Director Dana Cope. “Those who wait to cash in may find the money’s gone. That’s not a risk state workers are willing to take. It’s time to pull out of these investments now before the cart starts going downhill too fast for us to jump off.”

Hedge funds are notorious for high fees. Pension funds and investors pay these fees in hopes that the payoff will be higher, but for the past decade, hedge fund performance has been lacking. Cowell has the power to invest of 35 percent of the $90 billion state retirement system in “alternative investments,” a term that includes hedge funds.

A report released by SEANC in April found that Cowell could be paying up to $1 billion in fees for investments with the fund.

State employees are required to invest 6 percent of each paycheck into the retirement system.

 

SEANC, SEIU Local 2008, is the South’s leading state employee association 55,000 members strong. With 2.1 million members, SEIU is the fastest-growing union in North America. To keep up on SEANC’s daily news, follow us on Twitter @SEANC2008 and “like” us on Facebook at facebook.com/SEANC.Local2008.