Opinion

Klapp: Hedge funds can provide economic stability in times of uncertainty

Don’t let government regulators change that

Posted 5/24/22

Arizona families are facing a dire and tumultuous economic uncertainty.

Sky high inflation and world events have caused instability resulting in higher prices at the grocery store, gas pumps, and …

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Opinion

Klapp: Hedge funds can provide economic stability in times of uncertainty

Don’t let government regulators change that

Posted

Arizona families are facing a dire and tumultuous economic uncertainty.

Sky high inflation and world events have caused instability resulting in higher prices at the grocery store, gas pumps, and everywhere in between. And the timing couldn’t be worse, as many small businesses and individuals are just beginning to recover from the economic fallout of the COVID pandemic.

Yet, despite these trying times, government bureaucrats in Washington appear to be doubling down on a regulatory agenda that could heighten the problem and directly impact middle class Arizona families.

The U.S. Securities and Exchange Commission is poised to carry out an overreaching regulatory agenda that will amount to an attack on active investors such as hedge funds. The SEC, led by Chairman Gary Gensler, has issued a slew of far-reaching and fast and furious regulations that will impact the investment industry, the economy, and middle-class Americans.

These proposals may not seem like a direct hit on everyday Arizonans at face value, but they, unfortunately, would be devastating. That’s because hedge funds invest on behalf of institutional investors such as pensions, educational endowments, and charities. These organizations rely on hedge funds to deliver reliable returns to their beneficiaries, resulting in more retirement security, college scholarships, and charitable giving in local communities.

These organizations utilize hedge funds because they have a proven record of delivering reliable returns, even in market downturns, and offer significant investor protection in unstable or volatile market conditions.

Arizonans may be surprised to learn that many household name organizations rely on hedge fund investments. For instance, at least 12 Arizona retirement plans invest with hedge funds, including the Arizona Public Safety Personnel Retirement System and the City of Phoenix Employees’ Retirement System.

These investments have resulted in over $6 billion for tens of thousands of Arizonan first responders’ and teachers’ retirement plans.

Hedge funds also have a significant positive impact on Arizona colleges and universities. The University of Arizona and Arizona State University both invest with hedge funds. The returns have resulted in thousands of scholarships and financial aid packages that have enabled our state’s students to pursue higher education. These opportunities may not have otherwise been available without the extra resources that hedge funds provide.

Notably, hedge funds have also delivered $4.3 billion for Arizona nonprofits such as the Helios Education Foundation and the Virginia G. Piper Charitable Trust, allowing them to serve more Arizona families. Charities and nonprofits rarely have enough money in their coffers, and hedge funds allow them additional peace of mind and the ability to carry out their essential work.

We are all watching our finances a little bit more closely these days, yet the government still hasn’t gotten the memo. D.C. regulators should take a step back and look at whom their overreaching rules truly hurt: everyday Arizonans who rely on retirement savings, financial aid, and charities.

If Washington wants to reduce the economic squeeze we are all experiencing, it will immediately walk back its overreaching proposals.

Editor’s Note: Suzanne Klapp is a former member of the Scottsdale City Council and retail business owner.