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Alternative Market Briefing

New York City public pension pulls out money from hedge funds for underperformance

Friday, April 15, 2016

Komfie Manalo, Opalesque Asia:

The $55bn New York City Employees’ Retirement System on Thursday voted to pull out its $1.5bn allocations into hedge funds and is also mulling doing the same with its $8bn investments in private equity, reported the New York Post.

In a unanimous vote, New York City’s public employee pension, which manages the money of some 350,000 municipal employees, said the pension fund is withdrawing its investments in hedge funds, including D.E. Shaw, Perry Capital and Brevan Howard. The pension fund earned 3.9% from its hedge fund portfolios after paying nearly $40m in the fiscal year ended June 30, 2015.

However, the figure is below the 7% target annual return, the pension said. "They have severely underperformed," City Advocate and pension fund trustee Letitia James told the Post.

She added that the hedge funds failed to provide them protection during a down market as was promised them and also failed to justify the high fees they charge.

A day before voting, the pension system said it was weighing exiting its of hedge fund investments because of lagging performance, high fees and the riskiness of the asset class. Hedge funds make up 3% of the civil employees’ fund’s $55bn ......................

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