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Saturday, 21 January 2017
Last updated 8 hours ago
Jun 5 2013 | 10:25am ET
Loews Corp.'s James Tisch relies on hedge funds to boost his company's returns, but doesn't envy their lot in life. In fact, Tisch said, it's the other way around.
"They're phenomenally jealous of me, believe it or not," Tisch told Bloomberg News at the Bloomberg Hedge Funds Summit yesterday. "They say to me, Jim, you've got permanent capital. Your money can't leave. But all these other guys, if they have a bad quarter, a bad year, boom! Look at SAC Capital."
Tisch, Loews' CEO, keeps most of the company's money with insurance unit CNA Financial Corp., which invests both the company's money and client premiums in, among other things, hedge funds. It's a move that some hedge funds—including SAC—have tried to make, creating reinsurance companies that invest their capital and premiums with the firms that found them.
Tisch said that CNA's hedge fund portfolio helped increase its investment income 11% last year. "We've made the decision to invest in hedge funds as 'the spice in our soup' that's going to add to the earnings."
Tisch also defended the hedge fund industry against allegations that its fees are too high, noting that it would be more expensive to build in-house teams with the expertise and breadth that hedge funds make available. And, he added, he favors smaller hedge funds over the industry's giants.
"We are very wary of managers that have $10 billion, $15 billion, $20 billion, because you have to wonder, how can they generate outsize returns with so much money," he said. "We are constantly looking and probing and trying to find the new guys on the street, the people that aren't loaded to the gills."