Here's a probable government mistake that we've been warned about early and often.
Today’s low-interest-rate environment has made the hunt for investment income tougher than ever. Many overseers of public pension funds, desperate to bolster returns and meet ballooning retiree obligations, have turned from traditional investments like stocks and bonds to hedge funds and private equity. . . .
Fans of alternative investments argue that they can generate higher returns. But the increased risks, higher fees and lack of transparency associated with such investments make them problematic. A 2007paper by Fiona Stewart at the Organization for Economic Cooperation and Development in Paris said that “lack of transparency makes the level of risk and type of exposure hard to gauge” in hedge funds.
See also "The Real Reasons We Have a Public Pensions Crisis".
Wall Street greed isn't to blame for the public pension crisis. Fund officials are in a frantic search for high returns, having been led to a desperate state by politicians.
(The pacesetter for the "alternate investments" craze, Yale's endowment, has already started to throttle down. Will government pension funds pay attention? I wouldn't hold my breath.)