Friday, September 19, 2014

Does Not Follow

Since we are on the subject of the media's pathetic obsessions, CALPERS recent decision to ditch all of their hedge fund investments has stirred up the predictable pot shots at hedge funds  (fortunately, sans the Freudian projection...)

Let's not rehash the active vs. passive investing smackdown yet again.  But riddle me this...

We know that government is woefully deficient at most things it undertakes.  Furthermore, we know that CALPERS is a particularly egregious example of the characteristics that make government terrible at what it does (i.e. patronage staffing, massive bureaucracy, poor incentives).  A simpleton could have predicted that CALPERS would turn out to be terrible at investing in hedge funds, and,  alas, they were.  How is this evidence that hedge funds stink?

Hedge funds may indeed be a scam, a raw deal and the root of all evil, but the fact that California's pension bureaucracy sucks at what it does is not evidence of anything other than that government bureaucracies suck.


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