US. Blackstone & Others Sued for Faulty Investment Advice to KRS
KKR & Co. L.P. KKR , The Blackstone Group L.P. BX and PAAMCO along with their founders have been accused of violating their fiduciary duty to the Kentucky Retirement Systems pension fund by giving the fund wrong investment advice.
Recently, a few Kentucky state workers filed a lawsuit against the three investment groups in Franklin Circuit Court. The lawsuit seeks monetary damages from these firms for losses incurred by KRS in investments recommended by them. The defendants also include some former or current KRS board members, and, other officials and consulting firms that gave KRS investment advice.
Notably, in 2011, these groups recommended KRS to invest nearly $1.2 billion in three “black box” hedge funds. The funds were complex and high-risk hedge funds that carried high fees. KRS was not informed about the high risk involved in the investment and hence was unaware of how its money was being managed. The lawsuit claims that the hedge funds had promised high rates of returns to KRS, which they ultimately failed to deliver. As a result, KRS had to suffer huge losses.
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