Hedge funds have long found a Gold mine in the Pension Funds around this Country, Dave Iverson gives a good analysis with links. It reminiscent of the mafia’s use of the Teamsters Funds in the 1960s-80s. The rationale behind this Scalping practice comes in large amounts of steady increasing finance, under slipshod supervision of Fund managers without intrinsic stake in the success of fund. Fund managers face only Firings if there is intense loss to the Funds, and gain Salary and Bonuses with high Profits rates in invested funds. Hedge funds can promise high front-end Profits, and Pension managers receive their bonuses from these Profits; no one seriously worried about the long-range viability of the investments. Future losses can be written off by both Pension and Hedge fund managers without financial cost to themselves, while all participants in both Hedge and Pension funds must swallow the losses.
The Practice becomes doubly deadly by the fact that Short-term Profits are maximized by the creation of bubbles in the Market. Bubbles, by their innate nature, must burst at some future date; the entire sector of the Market washing out false value to return to structural value. Hedge Fund investors need realize that they are always buying only structural value, when they are often purchasing at false value Prices; managers completely in favor of the false value Pricing, which heightens the Short-term nominal value of Trading. Investors in both Pension and Hedge funds are ‘Buying High and Selling Low’.
Almost All Market analysts would deny my last Statement, but it is true for small Periodic amount continuous investors. Their Fund managers will almost always be buying above structural value, if for the nothing else, the driven Prices generated by themselves and their other compatriot fund managers. Participant sellout will invariably be maintained at the lowest Periodic prices at the times of Sale (or in the monthly payments from the fund involved); this to maximize the total amount of transferable funds for investment for the fund managers to derive their immediate Profits. That is the Way it is! lgl