We’re all familiar with the economic engines that keep Nevada moving – most of them, at least. Tourism, gaming, mining, manufacturing and logistics all get their due as the state’s economic drivers.
Yet many Nevadans rely on one economic driver that they likely don’t think of: hedge funds. Hedge funds are a misunderstood but critical component of our economy and our financial system. Recent attention from Washington, D.C., has unfairly maligned hedge funds, and misguided politicians are attempting to score points with harmful proposals that would cause economic pain across Nevada.
Many people don’t realize that pensions, nonprofits and university endowments invest in hedge funds to grow their market portfolios. It happens across the country and it happens here in Nevada. As these hedge fund–managed portfolios grow, the gains are passed on to underlying investors. In many cases, that means retirees, charities, and aspiring college students.
Organizations representing these investors rely heavily on hedge funds to secure their financial stability, so that they may provide for those who depend on them. If D.C. and Carson City fail to understand this and over-regulate hedge funds, these underlying investors will be the ones who feel the pain. Over the past 50 years, I have worked in the financial world in addition to serving the state of Nevada as both treasurer and an assemblyman. I can tell you, through good times and bad, Nevadans never lose sight of their goal to create a stable financial future for themselves and their families. That can be a challenge at times, but there has always been a constant for our retirees: pension funds that provide retirement security for the Silver State’s work force. In order to provide that security, Nevada’s pensions are heavily invested in and rely on hedge funds. The Southern Nevada Culinary and Bartenders Pension Plan invests $159 million for 107,812 plan participants, many of whom work in our state’s vibrant and world-famous hospitality industry. The United Association of Plumbers & Steamfitters Local 525 Pension Plan invests $24 million in hedge funds for 1,764 plan participants. The financial security of thousands of our workers depends on the sophisticated investment strategies hedge funds use to grow portfolios. A recent article about MGM discussed how one hedge fund, Blackstone’s Real Estate Investment Trust, is allowing MGM to enhance its financial flexibility and secure new growth opportunities by selling real estate holdings to Blackstone. Hedge funds are now some of the largest landowners in Las Vegas, and those funds are helping fuel the city’s economic recovery. Similarly, charities and nonprofits do a tremendous amount of good for Nevada. Communities both large and small rely on them for wide variety of services and acts of good will. As chairman of the National Association of State Treasurers Foundation, which works to provide financial literacy and education to underserved communities, I saw firsthand the value charities have, as well as how difficult it is for them to acquire funding. That’s where hedge funds step in, taking investments made by charities and nonprofits and growing them over time, passing the benefits to our communities through the organizations that serve them. Organizations such as the Gabelli, of which I served as the managing director, and UNLV foundations each have tens of millions of dollars in hedge fund investments. As these investments are managed and grown by hedge funds, the tangible impacts they bring to their communities grow as well. The message from all those invested in hedge funds is clear: this critical component of the economy exists on Wall Street, but delivers for Main Street Americans, as well as the Las Vegas Strip. Lawmakers need to remember those served by hedge fund investments.
Punitive measures designed to punish hedge funds will only hurt retirees, charities, and hardworking people across Nevada. Robert Seale served as Nevada state treasurer from 1991-99 and as an assemblyman in 2004-05. This Voices column was first published Aug. 2 by the Nevada Appeal, a sister publication of the Northern Nevada Business Weekly.
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