Key federal lawmakers at a House Financial Services Committee hearing today expressed concern about what might happen to pension funds if their hedge fund investments go sour.
The lawmakers provided little guidance on what sort of cure they might prefer, other than a suggestion from Rep. Stephen Lynch, D-Mass., that the percentage of pension plan assets exposed to hedge funds should somehow be limited. Rep. Jeb Hensarling, R-Texas, said he was concerned that losses from pension funds that make bad hedge fund investments could contribute to the need for a taxpayer bailout of the PBGC.
Rep. Barney Frank, D-Mass., said he is concerned about public pension plans, which are not insured by the PBGC and are not subject to the regulations of the Employee Retirement Income Security Act of 1974. That is something we will be looking at, Mr. Frank said.
The consensus among the witnesses representing the hedge fund industry was that any new regulatory obligations should be targeted solely at the pension funds, not hedge funds.