Mon, Aug 3, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: The alpha conundrum: why pension funds struggle to generate consistent alpha through allocation to active managers

Wednesday, June 18, 2014

By: Stanley Altshuller, co-Founder and Chief Research Officer at Novus

Pensions are faced with an ominous future of growing liabilities and declining long-term returns, a trend that could jeopardize a large number of pension funds. The low interest rate environment and stunted expected returns have increasingly led pensions to look toward alternative asset classes such as hedge funds for more robust absolute returns. In the last decade we have, on average, seen pensions increase allocations to hedge funds. By some estimates pensions now allocate over 5% of their assets to hedge fund managers and the number is growing. But can pensions choose the managers that will outperform the market or the average hedge fund manager? For many funds generating alpha in the space has been a continuing struggle. In our seven years of working with large allocators such as public pension funds, we have observed many reasons for underperformance in active management. The problem is not unique to pensions; endowments, sovereign wealth funds and other private funds often suffer the same hardships.

Perhaps the alpha problem can be examined in three stages of the hedge fund investment process for a pension:

Screening:

  • Selecting managers for closer evaluation from the universe
  • Monitoring: Analyzing the manager’s investment process pre- and post-allocation
  • Aggregating: Understanding exposures and risks across an entire portfolio of fund investments. Screening

    ......................

    To view our full article Click here

  • Today's Exclusives Today's Other Voices More Exclusives
    Previous Opalesque Exclusives                                  
    More Other Voices
    Previous Other Voices                                               
    Access Alternative Market Briefing


    • Top Forwarded
    • Top Tracked
    • Top Searched
    1. Opalesque Exclusive: Despite bumpy June/July, CTAs hold on[more]

      Bailey McCann, Opalesque New York: To say that things have been rocky in managed futures recently is putting it mildly. In June, the industry saw its worst month on a performance basis in the past four years. Then yesterday,

    2. Investing - Hedge fund billionaires bet on London as revival gathers pace[more]

      From Bloomberg.com: London’s fund industry is bouncing back, and U.S. billionaires Steven A. Cohen and Ken Griffin are grabbing a piece of the action. Griffin’s Citadel and Millennium Management, a hedge fund run by Israel Englander, have bulked up in London, where asset growth is outpacing the U.S.

    3. Other Voices: Same day reporting and the evolving role of fund administrators[more]

      By: Scott Price, Head of Business Development and Client Management for North America, Maitland Ernst & Young’s latest glob

    4. Opalesque Roundup: Hedge fund assets rose to 11th consecutive quarterly record level: hedge fund news, week 31[more]

      In the week ending 24 July, 2015, the total global hedge fund industry assets rose to the 11th consecutive quarterly record level in 2Q15 to $2.97tln; Eurekahedge reported that hedge funds raised $93bn in the first six months of 2015; The SS&C GlobeOp Forward Redemption Indicator for July 201

    5. Cowen Group, Inc. to acquire Conifer Securities[more]

      Cowen Group, Inc. and Conifer Securities, LLC had announced the signing of a definitive agreement under which Cowen will acquire Conifer Securities, the prime services division of Conifer Financial Services LLC. The transaction, the terms of which have not yet been disclosed, was approved by the boa

     

    banner