Funds Hub
Money managers under the microscope
Morning Line-up: Hedge funds & oil, commercial property, banker bonuses
News and views on the asset management industry from Reuters and elsewhere:
Hedge Funds ditch oil – Financial News
Insurers and pension funds poised to embrace REITS – Reuters
Morning Line-Up: January performance, Laxey, Mentor
News and views on the asset management industry from Reuters and elsewhere:
Hedge funds rose in January – WSJ
Hedge fund Laxey seeks change at Alliance Trust – Reuters
Value of global pension funds hits record high at 16 trn stg – Guardian
Activist fund threatens proxy fight at Mentor Graphics – New York Times DealBook
Review of hedge fund launches, closures, trends – Opalesque
Morning Line-Up: insider trading, BP, 2011 outlook
News and views on the asset management industry from Reuters and elsewhere:
Insider trading defendants in prime time to deal – Reuters
U.S. pension funds prepare to sue BP over oil spill – Telegraph
Year-end planning: the 2011 fund outlook – Reuters
ICI: Long-term mutual funds rose $1.8bln in latest week – WSJ
Where pension funds went wrong
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.
He was especially critical of investors who had made an allocation to hedge funds or private equity as a form of diversification without properly thinking through the implications for overall risk levels. He pointed out that some so-called diversified portfolios had performed very badly during the financial crisis.
So what is a poor pension trustee to do? Kjaer said they needed to construct portfolios that differentiated better between alpha and what is just costly beta: “Particularly in alternative assets you see a lot of beta dressed up as alpha.”
He also suggested pension funds should think about reducing the overall risk they are taking. Pension funds tend to set the risk level too high in good times, blame the asset manager when things go wrong, and then downscale the risk at the worst possible time.
Kjaer believes pension funds need a more disciplined risk framework with decision rules that enforce regular rebalancing to top-slice frothy assets and buy undervalued assets.
“This prevents the assets with the highest drift from dominating the portfolio and gives you an automatic value bias,” said Kjaer. “It also prevents you entering markets where the upside is small in comparison to the downside.”
Morning line-up: LTCM, Asia, pension funds
Pension funds allocate across the breadth of alternative assets – HedgeWeek
Inflation and real estate top concerns among hedge fund and PE managers – HedgeWeek
Former LTCM trader surfaces at London-based hedge fund – City AM
Asia comes out on top in hedge fund performance study – FinAlternatives
Morning line-up: Geldof’s equity tip, UK public pensions, Jupiter’s debut
News and views on the funds industry from Reuters and elsewhere:
Geldof’s investment tip for UK pension funds - FT
Public workers to pay more towards their pensions - Telegraph
Jupiter higher on market debut- Reuters
Morning Line-Up: HarbourVest, macro funds and Californ-i-a
News and views on the fund industry from Reuters and elsewhere:
HarbourVest to list European loans fund – FT
California pension funds face huge shortfall - Reuters
Macro funds miss out on crisis – FT
Och-Ziff funds gained in March – WSJ
The ISA season starts now – Telegraph
A question of trust?
Signs of big-ticket investments from pension funds — New York State Common Retirement Fund has backed emerging market debt manager Finisterre Capital with $250 mln.
Despite 2008′s losses, pension funds are obviously keen to invest, perhaps because equity mutual funds lost them even more money than hedge funds during the crisis.
Just as interesting, however, is one of the possible reasons why the $126 bln NYSCRF chose Finisterre (whose assets fell as low as $420 mln in the crisis).
Performance aside, Finisterre claims one of the reasons it’s been able to attract money is because it didn’t put up gates, barring investor exits, during the crisis.
It’s still early, but maybe we’ll begin to see investors starting to shun those funds seen as having locked up their money just when they needed it most.
(Picture: Luke MacGregor. Investors are assessing how hedge funds behaved during storm of the credit crisis)
Pension funds warn of €1.5 bln regulation cost
As the debate over the EU’s controversial and highly-politicized AIFM proposals on hedge funds and private equity rumbles on, there emerges more evidence that boosts opponents of the plans.
An article in Global Pensions highlights a letter to the European Parliament’s Committee on Economic and Monetary Affairs from Dutch pension funds and asset managers, saying the implementation of the AIFM in its current form could cost 1.5 bln euros annually.
The way this would happen, the letter argues, is that pension funds may change their asset allocation, switching out of all non-Ucits, non-EU assets to more traditional assets such as equities or fixed income.
There is potentially a large disparity in returns — 6.46 pct on equities and fixed income and 8.84 pct on non-EU, non-Ucits alternatives. When translated across pension funds’ assets, the loss in income is 1.47 bln euros.
To compensate, these pension funds say contributions would have to rise by at least 6 pct.
Critics of the directive, aware that sympathy among politicians and the general public for hedge fund managers is limited, have seized on warnings by pension funds as evidence that the AIFM proposals could hit the average man or woman on the street.
They are also likely to raise concerns that regulation could be forcing funds to change their investment decisions.
