Workers’ Capital and Private Equity: Fiduciary Duty and the Imperative to Address Labor Risk

Pension funds for unionized workers increasingly invest with private equity asset managers. In this paper, we provide an overview of the private equity business model and the ways it can both negatively impact workers and their communities and create risks for pension funds' investment returns. Drawing on a case study of the 2023-2024 hotel workers' strike in Southern California, we also show how pension fund leaders can and increasingly are taking steps to mitigate the risks posed by private equity managers. We argue that such measures are not only permitted but mandated by trustees' fiduciary duty to safeguard beneficiaries' interests when making investment decisions.