[jaredeklee13]

The purpose of the bank's risk management is to protect the bank. A bank who services a hedge fund as a prime broker does not have an obligation to assist a pension fund in proper due diligence of a hedge fund investment.

The interests of the prime broker and hedge fund investors are often not aligned. e.g. Archegos - Goldman dumped the Viacom shares to save the bank from losses at the expense of Archegos.

Responsibility for a pension fund's risk sits with the pension fund.

Now if you're proposing that limiting a hedge fund's access to leverage by preventing banks from extending such leverage would overall de-risk the system thus providing a safer playing field for pension funds... possible, but you're attempting to derive causation in a complex system which begs the question of what unpredictable derivative effects come along with the change, the magnitude of those effects, and their net effect on safety.

[blacksqr]

If you're suggesting that the system is too complex to derive causation feasibly in the field of leveraging risk, then it's simply insane for pension funds to invest in hedge funds, and the fact that they occasionally blow up doesn't help the pension funds at all; because from the standpoint of all outside observers (including pension funds and other hedge fund managers), the blowups will appear random and provide no helpful information for future decisions.