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).
USS pension fund expands its internal investment team – Financial News
News and views on the fund industry from Reuters and elsewhere:
USS prepares for tough call – Reuters
Gambhir likes UK, Germany – CityWire
Wall Street still in the hedge fund game – Reuters
Market reprieve robbed clients of change – Reuters
The hedge fund industry’s anger at the EU’s Alternative Investment Fund Managers directive is hardly new now, but there are growing signs of discontent from another group — the pension funds that actually put their money into hedge funds.
Last week we reported USS (the Universitied Superannuation Scheme) and Hermes, which manages BT’s pension scheme, were criticizing the draft laws for potentially limiting their investment choice and upsetting portfolio balance.
Hot on the heels of USS – the UK’s second largest pension scheme — deciding to go ahead with plans to increase its investments in hedge funds comes news that another large local authority fund had started investing in the freewheeling asset class.
The CIO of the West Midlands Local Authority Pension Fund told us: “My belief in the benefits of diversification has strengthened and I think now is actually a good time to invest in hedge funds as they have been forced to improve their practices and some of the weaker ones have gone.”
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.