Mon, Mar 27, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Should public pension funds reduce their hedge fund allocations?

Tuesday, November 01, 2016

Donald A. Steinbrugge, CFA – Founder and CEO, Agecroft Partners

CalPERS was the first high profile public pension to pull out of hedge funds, and was followed a year and a half later by one of the New York City retirement plans. Recently, the number of public pension funds exiting or reducing their hedge fund exposure has accelerated. We believe this trend will increase over the next 12 months due to growing political pressure on investment staffs of public pension funds from the media, union employees, and politicians. The pressure is being driven by unrelenting negative articles about the industry focused on the recent poor performance of various hedge fund indices and high fees.

This trend comes at a time when the average public pension fund is only approximately 74% funded based on an average actuarial rate of return of 7.5% according to a research report from Wilshire Consulting's Investment Research Group. Many professionals believe that this expected return is unachievable in today’s low interest rate environment. If the actuarial rate of return was lowered to approximately 4.5%, which is what corporate pension funds are required to use, the unfunded liabilities of public pensions would skyrocket.

Many critics cite the underperformance of hedge fund indices, as compared to equity benchmarks since the 2008 market crash, as the basis for exiting hedge funds in favor of an increased allocation to stocks. This strategy strains limits of portfolio diversi......................

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. Hedge fund liquidations in 2016 surpass 2009 levels, new launches decline[more]

    Benedicte Gravrand, Opalesque Geneva: Even as the hedge fund industry's total assets exceeded the $3tln milestone last year, hedge fund liquidations increased. So much so that 2016 had the highest number of liquidations since 2008, claims the latest HFR Market Microstructure Report, re

  2. Hedge funds find no joy in macro as returns lag Trump rally[more]

    From Gulfnews.com: In 2017, macro hedge funds were expected to shine. So far? Not so much. It's been a far from impressive first two months for funds that trade around macroeconomic events. Discretionary funds rose just 0.3 per cent through February, according to Hedge Fund Research Inc., while the

  3. Strategies - Billionaire investor Marc Lasry shares how he's playing markets right now, Classic models are failing FX hedge funds desperate for return[more]

    Billionaire investor Marc Lasry shares how he's playing markets right now From CNBC.com: Buy on the prospect of deregulation. Sell on the enactment of deregulation. That's the strategy that billionaire investor Marc Lasry is implementing, according to an interview with CNBC in Las Vegas

  4. Opalesque Exclusive: Aberdeen makes the case for the lower mid-market[more]

    Bailey McCann, Opalesque New York: Aberdeen Asset Management has released a new paper focused on lower mid-market private equity. According to the paper, this segment of the private equity market is gaining popularity with private equity investors that are looking for multiple expansion and less

  5. Hedge funds await outcome of French elections, feel pinch on lower oil prices & weak dollar[more]

    Komfie Manalo, Opalesque Asia: Hedge funds felt the pinch of lower oil prices and weak U.S. dollar as the Lyxor Hedge Fund Index was marginally down as of the week ending 14 March, Lyxor Asset Management said in its Weekly Briefing. The Lyxor He