Public pensions have a complicated and increasingly strained relationship with hedge funds. While many pensions have increased their investments in hedge funds and other alternative assets, other pensions are turning away from these funds and looking for less expensive investments. Institutional Investor recently released its 2016 “Rich List” of the top 25 hedge fund managers. Altogether, they made $12.94 billion in 2015. This is more than the salaries of every kindergarten teacher in America combined. If hedge fund managers are earning this much, then their performance must be worth it, right? Turns out that may not be the case.

Increasingly, hedge funds have been criticized for poor performance. Last year the American Federation of Teachers and the Roosevelt Institute released a joint report entitled “All That Glitters is Not Gold.” Their analysis of 11 public pension plans that invested in hedge funds found that the group of pension funds lost approximately $8 billion in investment revenue due to the poor performance of the funds. A 2015 report by the New York City comptroller’s office found that over ten years, the city’s five public pensions had paid more than $2 billion in fees to hedge funds and received virtually nothing in return. According to data compiled by Bloomberg, hedge funds earned 0.4 percent- basically nothing- in 2015, despite the exorbitant fees they charged pensions to manage their money. A report by the Utah Legislative Auditor General’s office found that had Utah maintained its 2004 asset allocation and not invested any money in hedge funds, it would have gained $1.35 billion in additional assets by 2013.

Despite the poor performance and high fees among some hedge funds, public pension plans have increased their investment in them each year from 2011 – 2015. However, several large public pension plans have recently announced they are reducing their investments in hedge funds. Both CalPERS and the New York City ERS have announced they are eliminating their investment in hedge funds. In other states like New Jersey, hedge funds have received high levels of scrutiny for the fees they charge their clients, which include public pensions. The Arizona Public Safety Personnel Retirement System, Fort Worth Employees’ Retirement Fund and the Maryland State Retirement and Pension System have also all withdrawn from their investments in hedge funds- coincidentally, funds that later closed due to poor performance.

Hedge funds have not just delivered poor returns at a high cost though. So-called “vulture” hedge funds have been active participants in the fight over Puerto Rico’s debt crisis. As Puerto Rico’s economy has suffered over the past decade, its government has issued more and more bonds and other forms of debt to cover costs. As Puerto Rico’s bonds became less valuable, however, there were fewer investors willing to buy their bonds- except for the vulture funds. These funds specialize in purchasing the debt of distressed governments on the cheap and then demanding the full value of the debt in repayment. This can yield an enormous profit to these funds, but often at a high human cost to the citizens of the governments that issued the bonds. Currently, the government of Puerto Rico is seeking a legal means of restructuring its $73 billion debt. The vulture funds are obstructing this process and demanding that they be at the front of the line to get repaid, even if that means gutting pensions for Puerto Rico’s retirees.

Hedge funds charge high fees to manage investments, but have frequently delivered poor returns. Despite their underwhelming performance, the average hedge fund manager (among the top 25) earned $517.6 million in 2015. Meanwhile, many of these same hedge funds are fighting to make an enormous profit off Puerto Rican bonds they bought on the cheap, even if this means Puerto Rican retirees will see their pensions gutted.