Funds Hub

Money managers under the microscope

USS’s enterprise

March 2, 2009

rtr1g12yThe 23 billion-pound Universities Superannuation Scheme (USS) is boldly going where few investors are prepared to go at the moment and upping its allocation to hedge funds.

Despite last year’s record poor performance from the hedge fund industry, Britain’s second-biggest pension fund is sticking with a mission to double its allocations to hedge funds and private equity to 20 percent.

Pension funds were faced with a major problem after 2008 – do you buy or sell hedge funds?

If your equities are down 40 percent and your hedge funds down 20 percent, do you invest more in hedge funds because they performed better?

Or do you pull money out because they didn’t make money and because they’re now actually a bigger part of your portfolio than you’d originally bargained for, so you have to rebalance?

USS’s move backs up what some hedge fund firms have been telling me recently - that some institutions are very gradually putting money in.

Plenty of investors are pulling money out as fast as they can, either because their hedge fund investments disappointed their expectations of positive returns in all markets, or simply because some hedge funds offer a quicker means of accessing cash than some of their other investments.

But those who have the ability and courage to voyage into hedge funds at the moment may be able to seek out some of the best investment brains in the industry.

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