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More Public Pensions Dropping Hedge Funds

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A growing number of public institutional investors are questioning the value-add of hedge funds. Frustrated by fees, lack of transparency and more importantly, recent lackluster returns versus lower-cost vehicles, pension plans are trying to rationalize the need to have them included in their portfolios. Even a number of sovereign wealth funds have voiced concerns about the fee structures and lack of standards in hedge funds. To alleviate concerns and foster greater understanding about hedge funds, the Hedge Fund Standards Board established a mutual observer relationship with IFSWF, a former IMF-backed group on sovereign funds.

The California Public Employees’ Retirement System (CalPERS) was one of the first major U.S. public pensions to axe its hedge fund program. Will more pensions follow? The board of New York City Employees’ Retirement System voted on April 14, 2016 to get rid of its US$ 1.5 billion hedge fund program. The fund voted to end future allocations to hedge funds and “liquidate NYCERS hedge fund investments as soon as practicable in an orderly and prudent manner.”

Rationale

In calendar year 2015, NYCERS’s hedge fund portfolio lost 1.88%, losing to both the S&P 500 Index and Barclays U.S. Aggregate Bond Index. Hedge funds losing mandates from the NY pension would be Brevan Howard Asset Management, Fir Tree Partners, Brigade Capital Management, Luxor Capital Group, Perry Capital and D.E. Shaw & Co. In the fund’s 2015 fiscal year, they paid approximately US$ 40 million in fees to hedge funds. At this point, hedge funds will still manage money for New York City’s pensions for firefighters and police officers.

NYCERS invested with hedge funds “with the belief that these would add value to the performance – both by increased returns and decreasing risk by providing downside protection,” New York City Public Advocate Tish James said in a statement. “I have seen little evidence of either.”

Even the name-brand hedge funds, darlings of many pensions, took a hit in the first quarter of 2016. Hedge funds such as Citadel and Millennium Management were down 6% and 4.2%, respectively, to March 30, 2016. and March 31, 2016, from the start of the year.

ADIA Seeks to Sell KIC Headquarters

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The Abu Dhabi Investment Authority (ADIA) is seeking to sell the building that houses the headquarters of the Korea Investment Corporation (KIC). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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BMO and OTPP Test Blockchain Canadian Dollar Debt Deal

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The Bank of Montreal (BMO) and the Ontario Teachers’ Pension Plan (OTPP) participated in a landmark blockchain Canadian-dollar debt transaction. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Just Group Acquires Corinthian Pension Consulting

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Just Group plc acquired a 75% ownership stake in the holding company of Corinthian Pension Consulting Limited (Corinthian Pension Consulting). Operating in the institutional world for over 12 years, Corinthian Pension Consulting provides advisory services to defined-benefit pension scheme trustees and scheme sponsors undertaking bulk scheme exercises. The remaining 25% will be retained by current shareholders of Corinthian Pension Consulting. Robert MacGregor will continue to lead Corinthian Pension Consulting, as its Chief Executive Officer. Furthermore, Corinthian Benefits Consulting Limited and Corinthian Affinity Solutions Limited will continue to operate as before, becoming part of a newly formed holding company, Corinthian Group Holdings Limited.

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