Reuters – Low expected returns from stocks and bonds have persuaded some of the worlds top pension funds to look at hedge funds as a way of boosting their portfolios, panellists at a hedge fundconference said on Tuesday.
Poor average returns from the industry over the last couple of years — around 7.5 percent last year and less than 10 percent in 2004 — have not put them off and neither have losses of around 2 percent in May and June.
CalPERS [CALP.UL], the largest pension plan in the United States which has 83 percent of its assets in stocks and bonds, is looking to invest $4 billion of a total around $210 billion in hedge funds by the end of this year.
“We have relatively low return expectations from (stocks and bonds),” said Eric Baggesen, a senior portfolio manager at CalPERS at the conference organised by ICBI. “The problem we have is deploying capital in that (hedge fund) space.”
That is partly because large flows of money into the $1.5 trillion hedge fund industry in recent years have limited profit opportunities for many of the investment strategies they use.
The World Bank Pension Fund has 12 percent of its $14 billion under management allocated to around 40 hedge funds.
