Pension Funds Look Increasingly To Smaller Hedge Funds

May 4 2011 | 12:02pm ET

Small can apparently still be beautiful, at least to institutional investors who are reported to be taking a closer look at smaller hedge fund managers.

"Over the next 10 years we will see a significant increase in the percentage of pension plans investing a meaningful percentage of their hedge fund portfolio away from the largest managers to small and mid-sized managers,” says Doug Rothschild, managing director of Agecroft Partners.

Agecroft believes the shift will happen in part because managers of smaller funds are more “nimble.”

It may also happen because small funds have been generating big returns: hedge funds managing under $50 million returned an aggregate 13.1% on an annualized basis in the 15 years to December 31, 2010, according to Hedge Fund Research. For funds managing over $1 billion, that number was 11.62%.

Smaller funds also outstripped the 10.23% annualized return of the HFRI Fund Weighted Composite index for the same period.

No wonder, then, that pensions like the California Public Employees’ Retirement System and the New Jersey Division of Investment are looking at smaller funds. According to Pensions & Investment, one corporate pension fund has put $150 million in a fund of funds that invests in emerging minority- and woman-owned hedge funds.

Agecroft Partners expects pensions to follow the example of endowments, which have ceased to view hedge funds as a separate asset class—many leading endowments and foundations are invested primarily in alt asset managers, including large allocations to mid-sized hedge funds.

 


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR