UK – Man Group, the world’s largest listed hedge fund group, is limiting the hedge fund allocation in its own pension fund on the advice of Watson Wyatt, says chief executive Stanley Fink.
Fink said UK funds’ traditional 60%-70% equity allocation with the balance in fixed income could be improved in terms of risk and return by a 20%-30% allocation to hedge funds.
But Man’s own scheme was not doing this because it was following industry “best practice”.
“We listen to Watson Wyatt’s advice,” he said in a lecture organised by news and data group Reuters.
The Man scheme’s hedge fund exposure was via fund of funds. Fink said he would prefer it to put more into single strategy hedge funds. There was no exposure to the “hyped” private equity asset class.
Fink was critical of the consulting profession. Actuaries had “constantly and consistently underestimated the increase in human mortality”. “They’ve consistently been wrong.”
“If you’re as accurate with your investment advice as you are on actuarial matters - I’ll know to do the opposite,” Fink said.
According to Man’s new annual report, the company’s £263m (€385m) UK scheme had £35m (13%) in hedge funds – with £120m (45%) in equities and £82m (31%) in bonds and £26m in ‘other’. Its Swiss and US schemes have no hedge fund allocation at all.
Moving on to the broader hedge fund market, Fink said the hedge fund universe is currently worth some $1.3trn, with around 8,500 funds. This could potentially grow to $3trn by the end of the decade.
He also told the audience that there’d be 20%-30% fewer financial sector jobs in London without the hedge fund industry.