Retail investors wanted hedge funds shorting GameStop stock to lose money when they ran up the share price. Pension plans may be collateral damage.
Reddit users and other retail investors who piled into GameStop stock aimed to take down Wall Street. Pension funds, which support ordinary Americans in retirement, may be an unintended casualty. Some hedge funds have sustained big losses as a result of bets against GameStop stock. Melvin Capital, for example, lost more than 50% in January. But pension plans — which invest assets on behalf of workers like teachers and police officers — may hold big positions in hedge funds. That means a financial hit for hedge funds could spill over to workers’ retirement assets. « Your ‘eat the rich’ mentality just took a bite out of the pension funds of working Americans, » Barbara Roper, director of investor protection at the Consumer Federation of America, said of GameStop investors who targeted Wall Street « It’s not a victimless game, and it’s not a Wall Street billionaire who’s going to ultimately pay the price, » Roper added. Roughly 7% of the $4.5 trillion in state and local pension plans are allocated to hedge funds, according to data published by the Center for Retirement Research at Boston College and the Center for State and Local Government Excellence.
