Large Pension Funds Slowly Begin to Dump Hedge Funds

hedge fund investingA growing number of large public pensions are beginning to shun hedge funds. This trend gained steam in 2014. From equity-focused hedge funds levying high fees, only to fumble a historic rally in stocks – a number of hedge funds are facing permanent redemptions from public funds. Board members of the US$ 17 billion San Francisco Employees’ Retirement System (SFERS) had a contentious and vocal debate on whether to augment hedge fund allocation. SFERS board member Herb Meiberger asked investment guru Warren Buffett on advice on whether to invest in a hedge fund. Warren Buffett wrote back in a handwritten note, “I would not go with hedge funds—would prefer index funds.” Buffett underline the word “not.” Hedge funds became Meiberger’s bête noire.

Another hedge fund that suffered client defections is London-based Capula Investment Management LLP which was founded by J.P. Morgan Chase & Co veteran trader Yan Huo.

Large European Pension Drops Hedge Funds

In 2014, the California Public Employees’ Retirement System (CalPERS) made the decision to pull the plug on its hedge fund program. Another major institutional investor is dumping hedge funds. Netherlands-based Pensioenfonds Zorg en Welzijn (PFZW), one of Europe’s largest pensions, all but eradicated its allocation to hedge funds. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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