Desperate for higher returns to cover their rising liabilities, plenty of pension funds have dumped their money into offshore hedge funds domiciled in places often thought of as tax havens — Bermuda, the British Virgin Islands, the Cayman Islands. But the dark secret to all of this is that these hedge funds typically underperform the S&P, so they’re not even a great investment. What’s more, they are very lightly regulated, to the point where independent directors of funds that have already failed continue to wield regulatory influence over those that have not…yet.

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