Defined Benefit Pension Plans: Recent Developments Highlight Challenges of Hedge Fund and Private Equity Investing

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A letter report issued by the Government Accountability Office with an abstract that begins "While plan representatives GAO contacted generally stated that their hedge fund and private equity investments met expectations in recent years, a number of plans experienced losses and other challenges, such as limited liquidity and transparency. National data indicated that hedge fund and private equity investments were significantly affected by the 2008-2009 financial crisis, and plans and experts GAO contacted indicated that pension plan investments were not insulated from losses. Most of the 22 plan representatives GAO interviewed said that their hedge fund investments met expectations overall, ... continued below

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United States. Government Accountability Office. February 16, 2012.

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Description

A letter report issued by the Government Accountability Office with an abstract that begins "While plan representatives GAO contacted generally stated that their hedge fund and private equity investments met expectations in recent years, a number of plans experienced losses and other challenges, such as limited liquidity and transparency. National data indicated that hedge fund and private equity investments were significantly affected by the 2008-2009 financial crisis, and plans and experts GAO contacted indicated that pension plan investments were not insulated from losses. Most of the 22 plan representatives GAO interviewed said that their hedge fund investments met expectations overall, despite, in some cases, significant losses during the financial crisis. A few plan representatives, however, expected hedge fund investments to be much more resilient in turbulent markets, and found the losses disappointing. Given the long-term nature of private equity investments, almost all of the representatives were generally satisfied with these investments over the last 5 years. Some plan representatives described significant difficulties in hedge fund and private equity investing related to limited liquidity and transparency, and the negative impact of the actions of other investors in the fund—sometimes referred to as co-investors. For example, representatives from one plan reported they were unable to cash out of their hedge fund investments due to discretionary withdrawal restrictions imposed by the fund manager, requiring them to sell some of their stock holdings at a severe loss in order to pay plan benefits."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • February 16, 2012

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  • June 12, 2014, 7:50 p.m.

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United States. Government Accountability Office. Defined Benefit Pension Plans: Recent Developments Highlight Challenges of Hedge Fund and Private Equity Investing, report, February 16, 2012; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc299199/: accessed August 21, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.