San Diego Pension Told Hedge Funds 'Just A Compensation Scheme'

Feb 25 2013 | 11:52am ET

A California public pension fund could do just as well with index funds as hedge funds, its consultant advises.

Salient Partners, whose Lee Partridge serves as chief investment officer for the San Diego County Employees Retirement Association, recommended that the pension ditch some of its hedge funds for passive index funds.

"A lot of hedge funds in general are just a compensation scheme," Salient quantitative expert Roberto Croce told SDCERA during the education session.

"It's really the fees," he added. "Fees, fees, fees. Fees have a very high Sharpe ratio: They are guaranteed. They are not going to miss any charges. Really, what we want to demonstrate here is that a very simple, plain vanilla implementation has a relatively large margin."

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