Dr. Everett Ehrlich, President of ESC Company, has just published a report, “The Changing Role of Hedge Funds in the Global Economy”, on hedge funds. According to the report, hedge funds could add billions of dollars in annual returns to pension funds, university endowments and the other entities that serve the public. The report claims that hedge funds are a tool that pension funds, universities and other institutions can use to diversify their investments, manage risk, and obtain secure returns.
Everett Ehrlich actually estimated the contribution that hedge funds could make to a pension plan. According to his findings that reallocating 10% of pension portfolios to hedge funds has the potential to bring nearly $13.67 billion in return annually. Everett Ehrlich’s analysis also found that hedge funds can add $1.73 billion return to university endowment funds annually just by moving 10% of assets to hedge funds.
Everett Ehrlich: Hedge funds are too small to bail
The findings of the report are important as public and private pensions are finding it more and more difficult to meet their financial obligations to retired persons. And the report dismisses the accusations against hedge funds that hedge funds are a source of the risks and leverage that led to the financial crisis, on the contrary, his analysis shows that hedge funds are not a source of risks and leverage. Hedge funds are the ones who suffered during the bank rescue operations (recent ban on short selling hurts hedge funds as well by draining liquidity from the convertible bond market). The paper ends stating that “Rather than “too big to fail,” hedge funds are generally “too small to bail.”
Everett Ehrlich served in the Clinton Administration as Under Secretary of Commerce for Economic Affairs, the principal economic policy official for Commerce Secretaries Brown and Kantor and chief executive of the nation’s statistical system.