FRANKFORT, Ky. (AP) – A group of former and current public workers is suing three hedge funds for selling risky investments and overstating returns to the agency that manages Kentucky’s struggling pension fund.
The lawsuit filed Wednesday seeks damages from hedge funds KKR Prisma, Blackstone and PAAMCO. The workers allege the funds sold “unsuitable ‘black box’ investments” in 2011 with massive fees to the Kentucky Retirement Systems, according to a summary of the 124-page lawsuit filed Wednesday in Franklin County Circuit Court.
Last year, the pension debt was a combined $21.7 billion across the five systems in the Kentucky Employee Retirement System.
The lawsuit says the KRS was fully funded in 2001 but after years of bad losses, the pension board trustees and their consultants decided to “take longshot gambles (in 2011) to try to catch up.”