Hedge funds have taken somewhat of a battering from local authority schemes, as we have reported over the past couple of weeks.
This week we covered the Oxfordshire County Council Pension Fund ditching its entire 2.2 per cent allocation to the asset class. While a relatively small allocation, it represented £33m of its £1.5bn of assets.
The Dorset County Council Pension Fund also decided to drop its 6 per cent allocation to hedge funds. Lack of transparency and high fees were cited by the schemes as reasons why hedge funds had been relegated to the cutting room floor.
The FT had also reported that the London Pensions Fund Authority had pulled all its holdings in Brevan Howard, the world’s largest hedge fund, over transparency issues. The scheme reportedly made a request to the hedge fund to redeem its £61m in April of last year.
This week we covered the Oxfordshire County Council Pension Fund ditching its entire 2.2 per cent allocation to the asset class. While a relatively small allocation, it represented £33m of its £1.5bn of assets.
The Dorset County Council Pension Fund also decided to drop its 6 per cent allocation to hedge funds. Lack of transparency and high fees were cited by the schemes as reasons why hedge funds had been relegated to the cutting room floor.
The FT had also reported that the London Pensions Fund Authority had pulled all its holdings in Brevan Howard, the world’s largest hedge fund, over transparency issues. The scheme reportedly made a request to the hedge fund to redeem its £61m in April of last year.
Perhaps it's not so bad. A hedge fund manager I was speaking to recently said some trustees had been turned off the asset class due to the negative headlines, but some trustee boards are “reopening the dialogue” and “quite a few are raising allocations”.
Indeed, a survey released last month by data provider Preqin found that pension schemes across the world have increased their allocations to hedge funds.
Source: Preqin
So do UK schemes have it wrong? Notably, the pension fund for Cern – the organisation behind the Higgs Boson particle physics research – is known for its huge allocation and belief in the asset class.
The Oxfordshire fund said in a report to scheme members: “Investing in a [diversified growth fund] will have a similar diversifying effect as hedge funds but at a much lower cost. There will also be greater transparency as to where the money is invested.”
This is an interesting point, as some of the most popular DGFs in the UK have strategies that are not dissimilar to hedge funds. Is it the name that is scaring off schemes?
The Preqin survey found the following:
Source: Preqin
With public sentiment and negative views towards the asset class being cited as reasons for not investing, hedge funds may need to revamp before they win back the UK dissenters.
