Pensions Eye Hedge Funds At GAIM

Jun 21 2012 | 10:44am ET

Pension funds made a splash at the GAIM Conference in Monaco yesterday, telling the gathered industry players that they planned—or were mulling—big new allocations to hedge funds.

Investments are not the first thing one thinks about the European Organization for Nuclear Research, better known as CERN. But, home to the world's largest particle accelerator and some of the most cutting-edge physics research in the world, the Geneva-based center is also home to some 2,400 permanent employees—with pensions.

And after experimenting with hedge funds last year, CERN's pension fund is ready to announce its findings: It wants more.

"In 2011, we started a small allocation of US$100 million to hedge funds and we made the decision this year to grow it to 15% of our fund," Grégoire Haenni, chief investment officer of the US$4 billion pension, said. That translates to more than US$500 million in allocations to hedge funds.

But CERN's sizeable move into hedge funds could be dwarfed by that of the U.K. Local Government Pension Scheme.

LGPS group investments manager Bridget Uku told the GAIM crowd that she and her stable of public pensions wanted to know more about hedge funds. And that could translate into huge allocations: LGPS manages some US$150 billion.

The scheme, which includes 99 British local authorities, already has about 2.5% of its money—almost as much as the whole of the CERN portfolio—in hedge funds. But any increase in that amount would translate into billions for the industry.

Still, Uku, who spoke as part of a panel with Haenni and Wake Forest University chief investment officer Jim Dunn, was cautious, noting that fees and risk perception "are a concern." But she didn't hesitate to outline what LGPS would be looking for if it chooses to become more aggressive on hedge funds.

"We are cash-flow positive with no liquidity constraint, but even so we would want to go into more liquid strategies, with markets so event-driven, we would want to know we could get out if we wanted to," she said.


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