Typically, institutional investors like pension funds are the biggest investors in hedge funds.
Maybe, but pension funds (should, at least) invest in multiple asset classes and assets to diversify risk. Not only equities and bonds, but if in hedge funds, then multiple hedge funds. Further, hedge funds generally have multiple investments going as well. In both cases if one particular thing goes to zero, not all the money (should) be lost.
Whereas with workers it is hard diversify risk away from your employer and your retirement savings if you have a pension.
This is why, contrary to popular opinion, shareholders are not actually owners of a company, but 'just' another stakeholder: other stakeholders would include employees, suppliers, bond holders, retirees, etc.
Shareholders are often lowest priority, and for taking on that risk of losing more, they get typically get rewarded more (i.e., stock goes up).
Bond holders and pension employees don't have a seat to control power.
This, shareholders are true owners of the company. But laws prevent them taking other stakeholders for a ride.
There are laws and legal precedents in multiple countries that state the shareholders are not owners:
* https://edwardslaw.ca/blog/shareholders-agreements-in-canada...
* https://www.ippr.org/articles/who-owns-a-company
* https://www.cambridge.org/core/journals/journal-of-instituti...
Further, directors and such have a fiduciary to the corporation and not to the shareholders:
> This separation of ownership and control provides the basis for many of the fundamental principles of corporate law. One example is the principle that the directors and officers of a corporation owe a fiduciary duty to the corporation: see Canadian Aero Service Ltd. v. O'Malley, [1974] S.C.R. 592.
* https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/699/ind...
And that stakeholders must be considered as well:
> Under the CBCA, directors have a fiduciary duty to act honestly, in good faith and in the corporation’s best interest. 2 Until a few decades ago, the corporation’s shareholders were often considered its primary beneficiaries. This shareholder-centric form of corporate governance was known as the shareholder primacy model, a model that would, theoretically, obviate managerial self-dealings. 3
> However, at the end of the last century a shift to include non-shareholder interests began to emerge. Many attribute this shift to the hostile takeover wave of the 1980s, which increased shareholder wealth efficiently but left employees scrambling for work and government institutions struggling to respond.4 The shareholder primacy model came under further scrutiny, in both Canada and the US, after the burst of the tech bubble in 2002 and the 2008 financial crisis.5
* https://www.nortonrosefulbright.com/en-ca/knowledge/publicat...
The primacy of shareholders started to become in vogue in the 1970s, and so (because of recency bias) is what is best known now, but there is a history of other philosophies before that:
* https://scholarship.law.cornell.edu/facpub/865/
And the primacy of shareholders, being thought of as the most important stakeholder, did not change the legal precedents.
... right after hedge fund "costs" are limited to a microscopic amount.
If you're going to treat private financial service organizations as if they are organized for public good (i.e. paying employee pensions), then they need to operate as such, rather than as wealth generators for their officers.
And don't come at me with "that keeps the incentives aligned - if the managers/officers make money, the hedge fund is making more money". I don't buy that the only way to get effective investment growth is by making the officers wealthy beyond all belief. Vanguard agrees with me.