Lawsuit Brought Against Managers for Poor Returns

January 1, 2018 James Heinsman In the News

Kentucky state taxpayers and the Kentucky Retirement Systems’ pension plans had a group of lawyers file on their behalf a lawsuit against KKR & Co., Blackstone Group and their founders. The lawyers are being advised by William Leach, who is a former class-action lawyer who, at the height of his powers engendered fear at corporations for his ruthless negotiating style.

The lawsuit alleges that the fund managers did not deliver the returns they were promised. The suit could be the gateway for further challenges to managers of alternative investment funds. The plaintiffs include a retired state trooper and a firefighter, who say that the fund managers misled them about their expensive and high-risk “black-box” bundles of hedge funds. The managers claimed, say the plaintiffs, that the funds were a safe way to provide high returns. Unfortunately the investments led to the pension system’s near bankruptcy, while the managers paid themselves their hefty, undeserved, fees.

“The claims are baseless,” Matt Anderson, a spokesman for Blackstone, said. “The Blackstone fund referenced in the complaint delivered to the Kentucky Employees Retirement System positive returns outperforming relevant benchmarks.”

KKR also denies responsibility.

“We take our fiduciary duty very seriously and believe that the allegations about our firm are meritless, misplaced and misleading,” said Cara Major, a spokeswoman for KKR.

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