Thursday, 24 July 2014
Last updated 2 hours ago
Mar 24 2006 | 7:10pm ET
Allstate Investments plans to invest 5-10% of its defined benefit pension fund assets with "lite" fund-of-hedge fund managers by year-end, meaning those that employ a 130-long, 30-short strategy, according to David Walsh, chief investment strategist for the plan. This type of strategy uses 30% of assets to go short, and then reinvests the profits into long-only equities, allowing the fund to increase its long-only exposure to 130% without employing leverage. He described the "lite" fund as a product in-between a long-only fund and a hedge fund.
Walsh, speaking at a Portable Alpha conference in Manhattan earlier this week, said the plan is also working on implementing a portable alpha program. The new program will hire managers to handle up to 10% of the plan's portfolio, which is $3.1 billion, according to the 2006 Standard and Poor's Money Market Directory.
Despite Allstate's foray into alternatives, Walsh isn't particularly keen on invest-ing in hedge fund products that are structured as limited partnerships. Instead, he thinks that managed accounts are a better choice for defined benefit plans because they are more transparent.
"It's a higher-cost approach to hedge funds," he said, "but it eliminates operational risk." He said he is willing to give up some performance for the transparency offered by a managed account. Walsh said that Allstate is planning to hire someone dedicated to managing the portfolio's hedge fund program, though he didn't give a timeframe for the move. The plan is currently interviewing two finalists for its first portable alpha investments, and expects to make a hire by the end of April.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…