How Hedge Funds Can Access Sovereign Wealth Funds

hedge funds

As U.S. pensions such as California Public Employees’ Retirement System (CalPERS) – which pulled out of hedge funds in 2014, and New Mexico Public Employees’ Retirement Association which lowered its hedge fund allocation from 7% to 4%, sovereign wealth funds are becoming a larger target market for hedge funds. There is a segment of sovereign wealth funds that allocate to hedge funds to achieve specific investment goals. For example, the Korea Investment Corporation (KIC) is a sovereign wealth fund that invests in hedge funds. One of KIC’s former chief investment officers Scott Kalb possessed a strong hedge fund background. Some other sovereign funds that commit capital to hedge funds include, but not limited: Abu Dhabi Investment Authority (ADIA), Australia’s Future Fund, Alaska Permanent Fund and Temasek Holdings. Aggressively, hundreds of hedge funds annually try to break into the world of sovereign wealth funds; however, many fall short for a variety of reasons such as sending unsolicited emails of investment performance. This leads to many hedge fund marketers giving up on the perceived Herculean effort of raising capital from giants, relying solely on family office money, wealthy foundations, fund-of-funds and consultants.

Though many hedge funds have fallen short in generating alpha in 2014, some managers scored stellar returns.

Performance and Repeatable Investment Strategies

Relatively speaking, hedge funds are an expensive asset class to invest into when compared to traditional active equity managers. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]


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