Large pension fund prepared to punt $17bn in hedges
INVESTMENT
San Francisco: The California Public Employees' Retirement System, the largest public pension fund in the US, said it would invest as much as $US11.25 billion ($17.6 billion) in hedge funds, increasing risk to boost returns.
"It's an area of opportunity where we can add value," Mr Bob Boldt, senior investment officer for public market investments at the $US160 billion fund, said in an interview.
Because of its size and visibility, Calpers's move could cause more public pension funds to take the leap into these private investment partnerships that cater to wealthy individuals and institutions. Hedge funds are subject to less regulatory oversight than most money managers and have more flexibility in the investments they can make, including the ability to bet on falling as well as rising prices.
At the beginning of the year, pension funds accounted for about 10 per cent of the $US220.5 billion invested in hedge funds, according to Hennessee Group.
Much of that money came from corporate retirement plans, said Mr Lee Hennessee, of the New York-based consultancy.
Calpers "could legitimise hedge fund investment" said Ms Nancy Everett, chief investment officer at the $US35 billion Virginia Retirement System. Virginia has $US1.5 billion in funds that buy stocks as well as short them a short being a wager that the shares will tumble.
Calpers will avoid some of the best-known hedge funds, such as Mr George Soros's flagship Quantum Fund and Mr Julian Robertson's Tiger Management both of which have lagged benchmark stock indices the past two years because they're too risky, Mr Boldt said.
Calpers's $US11.25 billion hedge fund ceiling represents a quarter of the $US45 billion it places with US stock and bond pickers. It will not necessarily channel all the money into hedge funds, Mr Boldt said.
Bloomberg
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