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Pension Provision Fits The Bill For HFs

A version of a bill working its way through Congress would allow hedge funds to accept pension fund assets beyond the current cap of 25% of their total assets, something some folks on Wall Street have been pushing for.

A version of a bill working its way through Congress would allow hedge funds to accept pension fund assets beyond the current cap of 25% of their total assets, something some folks on Wall Street have been pushing for. The provision is part of a pension bill sponsored by Reps. Robert Andrews (D-N.J.) and John Kuhl (R-N.Y.). If the bill passes – and some observers say the current climate in the House and Senate may make it a tough sell – it would put hedge funds in the category of fiduciaries, which would impose on them certain obligations to workers and retirees under the Employee Retirement Income Security Act, The Wall Street Journal reports. “These types of transactions will allow pensions to reduce costs and give pensions more flexibility and more options and more diversifications,” Scott Talbott, v.p. of government affairs at the Financial Services Roundtable told MarketWatch. Not everyone is thrilled about this potential development. Damon Silvers, associate general counsel of the AFL-CIO, calls it “a very bad idea” for its members, though he says the organization isn’t necessarily opposed to it as long as it’s regulated. Still, the move could be good news for investors that ironically could be hurt by the current 25% limit. “The perverse situation is,” Lisa McGreevey of the Managed Funds Association told The Wall Street Journal, “that the really good hedge funds get taken up with pension investments and can’t take on more, and that forces pension funds to go to investment advisers that they don’t really want.”

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