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Alternative Market Briefing

Survey: Hedge funds failed to provide US pension funds with promised superior and uncorrelated returns

Monday, November 16, 2015

Benedicte Gravrand, Opalesque Geneva:

U.S.-based public pension funds have become significant investors in the hedge fund universe, reported Preqin, a research house, in September. They are major allocators of capital to the hedge fund industry, accounting for approximately 16% of the total institutional capital allocated to the asset class. Preqin’ survey also reported that a third of hedge fund investors are looking to invest less capital over the coming year compared to the last 12 months, compared to 19% that are looking to invest more.

Lackluster returns (the HFRI Fund Weighted Composite Index is flat YTD, annualizing 3.16% in the last five years compared to 13.4% for the S&P 500 index), and high fees may cause those investors to question their investments in hedge funds.

Witness the California Public Employees’ Retirement System (CalPERS), the nation’s largest public pension fund, which decided to divest from hedge funds entirely ($4bn) in September 2014, due to high costs and complexity. CalPERS has reportedly focused on smart (or alternative) beta p......................

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