Ian Hamilton

This column is authored by Ian Hamilton, who is the founder of IDS Group. IDS provides fund administration services in Africa and Europe through Malta. He is also the founder of Scotstone Investments, a company that has fund structures and services for global emerging new managers.

CalPERS

The CalPERS’s disinvestment from the hedge fund market and the jitters it is causing needs discussion especially as there are some naysayers using it as an excuse to decry the hedge fund industry.

Hopefully pension funds will not be sheep and follow CalPERS’s decision, as the issues that CalPERS has with hedge fund investments are in many ways unique to that retirement fund.

The issue stems from the size of CalPERS and the 4% they had allocated to hedge fund investments.

They are correct in their assertion that the impact on the performance of the fund versus the amount of work they have had to do in monitoring the hedge funds is disproportionate.

4 % is not going to be able to have any significant impact upon CalPERS’ performance. It needs to be about 20% and if it were, then the fund would swamp the market.

There is a lot of debate as to what percentage exposure any investor should have to hedge or alternative investments. But much of the debate should focus on what are the pension funds’ objectives in investing in alternative investments.

I always say that investment products are sold for two different motives and one can clearly see that in the retail market. The emotions played on by advertising are greed and fear.

Greed drives the investor to purchase investment products that offer an easy way to riches. Fear drives the investor to choose p......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.