Facts About the Kentucky General Assembly
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More than seven years after a lawsuit was filed, Kentucky’s top legal officer says the state has reached a more than $200 million settlement with four hedge funds that had been tasked with investing on behalf of the state’s pension systems.
Under the settlement, announced Wednesday by Attorney General Russell Coleman, the four hedge funds — KKR & Co., Prisma Capital Partners, The Blackstone Group and Pacific Alternative Asset Management — will pay a total of $227.5 million to Kentucky’s pension systems. That money will be spread between the Kentucky Public Pension Authority, the Kentucky Retirement System and the County Employee Retirement System.
The lawsuit was initially filed in late 2017 by eight people who had been employed by the state. The 143-page filing alleged a number of Kentucky Retirement Systems leaders and other officials, along with the hedge funds and their executives, had taken part in a “civil conspiracy” to make risky investments that led to severe issues with the system’s finances. Months later, the hedge funds argued they were transparent about the $1.2 billion in investments sold in 2011 and they were just doing what they were hired to do.
Former Attorney General Daniel Cameron picked up the case in late 2020. Current Attorney General Coleman, who took office a year ago, celebrated the settlement in a statement Wednesday.
“As law enforcement, firefighters and other public servants, these Kentuckians dedicated their lives to our Commonwealth. It’s our Office’s responsibility to fight for them against those who put their pensions at risk,” he said. “I’m proud of our team who delivered this long-awaited outcome, led by our talented Civil Chief Justin Clark. I look forward to fully resolving this case so Kentucky’s retirees can enjoy the benefits they earned.”
The settlement still must be approved in Franklin Circuit Court, with a hearing scheduled for Feb. 26, and would mark an end to several other pending lawsuits against the hedge funds. Part of the $227.5 million set to be recovered by the state’s pension funds include about $145 million in assets controlled by Prisma Capital, which did not immediately respond to a request for comment.
Coleman’s statement noted the hedge funds named in the lawsuit continue to deny wrongdoing and maintain the deal was reached “to avoid the expense, distraction and inconvenience of further litigation.”
In a statement, Blackstone attorney Don Kelly reiterated that stance, arguing the hedge fund brought money into the state’s pension system. He cited an investigation released in 2022 from New York law firm Calcaterra Pollack that found no “violations of fiduciary duty or illegal activity” by Blackstone, KKR & Co. and Pacific Alternative Asset Management.
“(Blackstone) delivered a net return in excess of 30%, significantly outperforming all of KRS’s own benchmarks, and KRS’s own investigation showed that (Blackstone) ‘did an admirable job of protecting capital for their pensioners,'” his statement said.
Reach Lucas Aulbach at [email protected].
