Yeah, THAT'LL secure their retirement

The folks who run the pension system for Illinois teachers have settled on a solution to years of woeful underfunding — dump nearly $1 billion into hedge funds.  The Chicago Tribune reports:

In coming years, the $39 billion Teachers’ Retirement System will join as many as 40 percent of the nation’s public pensions in these complicated and lightly regulated investment partnerships.

Hey, everyone’s doing it, right? But what about the risks?  Oh, that’s all taken care of…

The Teachers’ Retirement System understands the risks embedded in these fast-moving investments, and it is well-equipped to monitor them, according to spokeswoman Eva Goltermann. “We go in with eyes wide open.”

Sorry, don’t think so.  If they were, they’d know what DR readers have known for some time now.  Or maybe they do and don’t care.  As Bill Bonner wrote just eight weeks ago:

…the average fund has not been doing well; so far in 2006 you could have done better by accident than by hedge fund. The typical fund is up only about 7%. The FTSE has risen 9% and the Dow is up 15%. This seems only to have made investors desperate to get into the tiny group of funds that are doing well.

And good luck with that.  Hedge funds that take money from public-employee pension systems can find themselves the targets of Freedom of Information Act (FOIA) filings from nearly anyone who wants to know how the money’s being invested.  Including their competitors.

The Daily Reckoning