U.S. Public Pension Funds and Risk Seeking Behavior of Money Managers : The Path to Alternative Investments

State Public Pension funds have increased their portfolios into riskier alternative investments to meet their annual required contributions (ARC). Our paper uses The Public Plans Data (PPD) to analyze the differences in alternative investments for 2001 to 2013 by Democrats and Republican lawmakers. The shift in funds from traditional to alternative investments ushers in a new era for public pension fund money managers and their appetite for taking on higher levels of risk. This paper shows that the shift from traditional low risk – low return investments to alternative high risk – high return investments of state public pension funds are due to changes in governance and risk seeking investment behavior of the money managers