Money managers under the microscope
Pension schemes are moving away from the usual equity/bond/real estate mix to put their eggs in as many baskets as possible. No wonder then that the USS — the 31.6 billion pounds UK universities pension fund — is putting an extra 1.5 percent of its assets, or about 474 million pounds, into hedge funds, as its CIO Roger Gray tells Reuters.
If you are rushing to the phone to pitch business with Mr Gray, however, STOP a minute fund manager: be prepared, the USS is not only eyeing alpha, it is going to ask a few questions about how alpha is distributed and how investors are protected.
“Is the board of the hedge fund constituted in a way which gives us assurance that they are actually acting in the interest of the limited partners rather than in the pocket of the managers?” he said.
Key words for this pitch: governance, transparency, best and practice.
Key advice for this pitch: forewarned is forearmed. (The USS does not seem to need the usual ’caveat emptor’ advice).
Knut Kjaer, adviser to some of the world’s biggest asset pools, and former head of Norway’s government pension fund, told pension funds some home truths at the CFA Institute’s European Investment Conference on Tuesday.
Kjaer said the financial crisis had exposed two main pitfalls in institutional investment – the tendency to run with the herd, and the adoption of overly complex portfolios.
News and views on the hedge fund sector from Reuters and elsewhere:
U.S. judge OKs ‘Terminator’ sale to hedge fund – Reuters Should hedge funds be disenfranchised? – BBC Blog Ucits-compliant hedge funds growing – Hedge Funds Review How to invest $100 mln in 2010 – Seeking Alpha
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Hedge fund compensation; New funds, new tricks – Seeking Alpha
Hedge funds gain in August – Reuters
Alpha advertising - FT Alphaville
GLG Partners has confirmed positive client money flows are back on the agenda, reporting net sales of $2.2 billion in the second quarter in a trading statement which sparked a rise in the share price. The company also reckons strong performance among its funds has set the scene for more to come.
Barclays Capital last month predicted net inflows could reach as much as $50 billion in 2009, and GLG shows the numbers are starting to come through to support that theory. Of about 300 investors, BarCap found that some 80 percent were expecting to move back out of cash and into hedge funds this year.
Hedge fund firms are once again positioning their businesses for better times ahead — lending further weight to anecdotal evidence that investors are turning back to the industry.
Mark Lyttleton, manager of the 1.5 billion pound BlackRock UK Absolute Alpha fund, gives his view on the recent rebound in the equity market and his outlook for the rest of the year and beyond.
from Global Investing:
The Lewis Carroll poem The Hunting of the Snark (An Agony in 8 Fits), follows the misadventures of a group of seafarers, amongst them a banker and a broker, as they search for the elusive mythical beast. We are warned at the outset that catching Snarks is all well and good, but beware if your Snark is a Boojum, because - well, we'll come to that.
Alpha looks set to become as equally elusive in the next 20 to 30 years as investors switch to passive investing and exchange-traded funds (ETFs) in greater numbers, and the amount of information available to all market participants increases.