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Opinion

Klapp: Punitive tax policy targeting hedge funds threatens middle class, retirees

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As a former elected official who has retired from Scottsdale public office under the Arizona State Retirement System, I am concerned about the current unfair targeting of hedge funds in Washington.

Based on an unfortunate and highly publicized event earlier this year involving a hedge fund, some congressional members are grandstanding about the entire system of investing through hedge funds without considering the long term effect from additional regulation and taxation on many middle class citizens and families that rely on pension investments in hedge funds for sound financial reasons.

Arizona’s State Retirement System is healthy at over 70% funded, partly because it invests in hedge funds to meet financial obligations, to diversify investment portfolios and to manage risk.

Many retirement programs cannot boast of the same level of solvency as our state program.

Elected county and municipal public officials participate in the pension program under the Arizona system along with employees, including all public safety personnel, and correction officers. Monies contributed to the pension program are pooled and invested through institutional partners.

The Arizona state retirement system provides retirement security to more than half a million members, including more than 100,000 retired members. We must avoid any policy proposals that needlessly burden Arizonans and threaten their financial security.

In Arizona, $10.8 billion is invested in hedge funds, with about 60% of those funds from pension programs. Arizona colleges and non-profit organizations are also heavily invested in hedge funds. Arizona State University invests $262 million in hedge funds.

These investments help fund scholarships and financial assistance for about 46,000 students. The Helios Education Foundation invests $158 million in hedge funds.

In the United States, pensions invest approximately $790 billion in hedge funds to support retirement security. Please consider that overreaction and overregulation of hedge funds can have long term devastating effect on millions of hard-working Americans who are investing for a secure retirement.

Please consider a rational rather than emotional approach, so that hedge funds are not unfairly threatened to the detriment of Arizonans seeking to maximize funds they receive in retirement. Our incomes are falling from the effects of COVID-19 and rising prices, so focusing now on limiting returns on investment funds is certainly bad timing and even worse policy.

Editor’s Note: Suzanne Klapp is a longtime Scottsdale resident and former City Council member.