Pension advances are part of an extremely ugly food chain. Pension plans have been moving more and more capital into hedge funds. Various credit and high yield hedge funds, having received commitments from pension plans, invest in the paper created by the pension advance firms. Thus, the pension advance firms have the capital to make advances to retirees, which earns a return for the hedge fund and the pension plan. Of course, the pension plan uses the returns to pay retiree benefits, but those benefits have been pledged to the pension advance firm. There’s one clear loser in this cycle: the retiree.