Hampton: Hedge funds are essential to our financial stability

If there’s one thing we learned from the past two years of economic turbulence, it’s the value of sound financial planning.

Americans are looking for a stable, predictable economic future that allows them to provide for their families and build a secure future.

I know this firsthand from my years as a financial adviser, helping my clients to anticipate life’s twists and turns as well as my tenure on the Goodyear City Council over the last five years.

It’s not always easy to achieve financial independence and stability — but it’s a worthy goal that many of us strive toward, especially when thinking about the future we will leave behind for our children and grandchildren. The actions of our policymakers and regulators directly affect our ability to achieve these goals. And unfortunately, many of our federally elected officials and political appointees outside of Arizona appear to be disinterested in supporting our financial independence. In some cases, they are actively undermining it.

Recently, there have been rumblings from Washington that officials will slap many overreaching, burdensome regulations on hedge funds — and many folks around Arizona and in Goodyear don’t realize the devastating effects this would incur in their backyard. As a professional financial adviser in Goodyear, I’m blessed with a very solid professional understanding of many financial matters, but most Americans have a fundamental misunderstanding of hedge funds and what they do.

While their investment strategies may be complex, their role in our economy isn’t. Public pensions systems and university endowments are significant investors in hedge funds throughout the country. The returns they receive from their investments support retirement security for hardworking Americans (including Goodyear’s retired public safety professionals) and college educations for thousands of students. As Washington trains its crosshairs on hedge funds, the target they’ll hit is ordinary, everyday Americans trying to plan for a better life.

If Washington’s regulatory overreach comes to pass, retirees will be the first to lose out, including those in Goodyear. The state’s Public Safety Personnel Retirement system invests over $1 billion in hedge funds for more than 30,000 beneficiaries. Hedge funds carefully manage this substantial investment, growing it over time and protecting it against risky market conditions.

The returns go directly to Arizona’s retired first responders, such as EMTs, law enforcement and firefighters. We’ve relied on these professionals so much over the past several years, as they’ve served as our first line of defense against rebounding crises. The least our policymakers can do for them is to make sure their pensions aren’t at risk to score political points.

Teachers’ pensions are also at risk due to government regulatory overreach. For example, the city of Phoenix’s Employee Retirement System invests over $100 million for tens of thousands of plan participants, including teachers. Targeting hedge funds will make it more difficult for retired Arizona first responders and teachers to see what’s around the corner regarding their financial future. It’s beyond unfair to subject them to that staggering uncertainty after repeatedly serving their communities throughout their careers.

College scholarships are also at risk if hedge funds are targeted. Since the price of college tuition has risen dramatically, millions of aspiring students rely on scholarships to afford yearly tuition. Many don’t know that investments in hedge funds partially fund these scholarships.

For example, the endowments of both the University of Arizona and Arizona State invest over $100 million to benefit nearly 100,000 students combined. Endowments rely on the same safeguards offered to pensions — steady returns over time and protection against volatility. As endowments’ hedge fund investments grow, so do the scholarships they support. Without hedge funds, thousands of aspiring students could miss out on the opportunities provided by higher education.

Our policymakers risk making it virtually impossible to plan for retirement or grow educational opportunities in our state and across the country by targeting hedge funds.

The tools hedge funds use to support pensions and scholarships may be complex, but the role of hedge funds is not. It’s time for Washington to understand that hedge funds work for Main Street, and all Arizonans stand to benefit from these critical financial tools.

Editor’s note: Brannon Hampton is a certified financial advisor and serves on the Goodyear City Council.