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Tim Higgins: Hedge funds do enormous good for UW students, research, pensions, nonprofits

Tim Higgins: Hedge funds do enormous good for UW students, research, pensions, nonprofits

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Tim Higgins

Tim Higgins

One of the greatest honors of my life was serving as a member of the UW Board of Regents. The Regents are entrusted with the important job of overseeing the 13 universities that make up the University of Wisconsin System. As a proud UW-Madison graduate, I know the life-changing value of a degree from one of our wonderful UW System campuses.

Ensuring meaningful access to higher education is certainly one of the keys to solving the workforce challenge so many employers are facing today. One of the roles I played with the Regents was to chair a task force that looked at how the Board of Regents developed and set tuition rates. There is always a difficult balance between keeping tuition affordable, while also ensuring our campuses are properly funded to attract the best professors and researchers from across the globe.

But an important piece to ensuring access to a university education and well-funded campuses is often overlooked. UW System works with financial professionals to ensure smart investments with university-controlled endowments and foundations that fund scholarships and other expenses not covered by tax dollars or tuition. Part of that investment strategy for UW System includes significant dollars in often-misunderstood hedge funds.

Hedge funds are an important part of a diverse investment strategy for large, institutional investors such as pensions, university endowments and charitable foundations. They have a proven track record of delivering reliable returns by leveraging complex investment strategies.

In fact, UW System has $152 million invested in hedge funds that help support the higher education needs of 164,494 students. That figure doesn’t even count the $786 million the Wisconsin Alumni Research Foundation puts into hedge funds to help finance the cutting-edge research that happens on the UW-Madison campus. Endowments for leading private universities including Lawrence and Marquette also utilize hedge funds to give scholarships to thousands of young people who may not otherwise be able to attend college.

The University of Wisconsin System has $152 million invested in hedge funds that help support its mission, and the Wisconsin Alumni Research F…

Hedge funds aren’t only used to help balance the investment portfolio for higher education. Hedge funds are also used to ensure promised retirement benefits are realized for millions of Wisconsin seniors. The State of Wisconsin Investment Board, considered one of the best in the country, invests $6.6 billion in hedge funds. The Wisconsin Investment Board is responsible for ensuring most of the police, firefighters and teachers in the state can enjoy retirement without worry that the benefit’s they agreed to will be altered.

Hedge funds even help charitable foundations do critical work that benefits all of our communities. At least 23 foundations and nonprofits in the Badger State have $5.38 billion invested in hedge funds. Those dollars are often used for services that many people count on, and they help improve lives in truly meaningful ways. They are able to do all of that in no small part because of their investments in hedge funds.

Unfortunately, federal regulators have a terrible habit of overstepping their bounds — and that’s exactly what’s happening right now at the Securities and Exchange Commission (SEC).

The SEC’s current proposals related to the alternative investment industry — including hedge funds — would needlessly insert regulations and expand the government’s role in capital markets. The truth is that capital markets are already well-regulated, making the SEC’s actions a classic example of trying to find a solution to a problem that does not exist. The SEC’s actions could actually hurt those who rely on hedge fund investments for education opportunities, retirement security and community support.

It is my hope the SEC and our lawmakers in Washington will recognize the valuable role hedge funds play in supporting communities here in Wisconsin and across the country. Instead of creating obstacles that prevent smart investments, they should be doing the opposite and allow for the full growth potential of all investment strategies. If they don’t, their actions will have real consequences for everyday Wisconsinites and Americans.

Higgins, a small-business owner in Appleton, served on the UW Board of Regents from 2011-2018.  

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