A watchdog agency wants federal pension regulators to give plan administrators more advice about the risks of investing in hedge funds and private equity offerings.
Officials at the U.S. Government Accountability Office say the U.S. Labor Department should come up with guidance for defined benefit pension plan managers, and especially for managers of small pension plans, about the risks of investing in hedge funds and in private equity arrangements, and about strategies for handling those challenges.
“Pension plans invest in hedge funds to obtain a number of potential benefits, such as returns greater than the stock market and stable returns on investment,” Barbara Bovbjerg and Orice Williams, GAO directors, write in a report on the GAO’s views. “However, hedge funds also pose challenges and risks beyond those posed by traditional investments.”
Hedge fund and private equity investors may have little information about the funds’ underlying assets and their values, which could limit the opportunity for oversight, Bovbjerg and Williams write.