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Alternative Market Briefing

Agecroft Partners sees 5 outcomes from CalPERS hedge fund move

Tuesday, September 23, 2014

Komfie Manalo, Opalesque Asia:

Global hedge fund consulting and marketing firm Agecroft Partners predicted five outcomes from the decision of America’s largest public pension, the California Public Employees' Retirement System or CalPERS, to ditch its entire $4bn hedge fund program.

Agecroft Partners founder and managing partner Donald A. Steinbrugge said that the average public pension fund is significantly under-funded based on a high actuarial assumed rate of return of 7.5%. If they do not achieve a 7.5% rate of return, their unfunded liability increases and so does the possibility that the plan beneficiaries may one day see their retirement benefits reduced, like what the City of Detroit experienced.

He said, "Hedge funds can provide many positive attributes to a multi-asset class portfolio. This includes better potential risk adjusted returns, enhancement of downside protection, low correlation with long only benchmarks which improves diversification, and most importantly, enhancement of forward looking returns to better match their actuarial assumed rate of return."

Steinbrugge made the predictions after CalPERS last week announced it would divest its entire hedge fund program. The pension said the program was too expensive and too complex to effectively move the needle for ......................

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