Pensions Prove Poor In Picking Hedge Funds

Aug 3 2011 | 10:50am ET

More and more pensions are investing more and more money in hedge funds, but they could be doing a much, much better job, according to a new study.

While the average U.S. pension fund's hedge fund investments easily bested the broader markets, they badly trail overall hedge fund returns, according to a Financial Times analysis of a report by three finance professors. U.S. pensions' hedge fund investments managed a 1.9% annualized return from 2000 through 2008, a period in which the average hedge fund rose about 5% per year.

Canadian pensions did even worse, with their hedge funds returning only 0.6% per year. That figure is especially galling for Canada, whose stock market managed a 2.9% annualized return over the period.

The poor returns come as an increasing number of pensions crowd the hedge fund space. In the year that the study began, 2000, only 2% of North American pensions invested in hedge funds. By 2008, more than 20% did so.


In Depth

Q&A: TCA Fund Management's Bob Press on Small-Cap Private Equity

Aug 25 2016 | 8:55pm ET

The emergence of private credit as a replacement for traditional bank financing...

Lifestyle

Kiawah: Island Reversal

Aug 24 2016 | 9:59pm ET

Looking for real estate investments but the typical real estate fare isn’t cutting...

Guest Contributor

Old Hill Partners: Embrace Illiquidity

Aug 9 2016 | 2:39pm ET

The age-old financial concept that higher yields are the result of higher risk and...