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Pension funds plan “huge” hedge fund move – study

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GLOBAL – Greenwich Associates says pension funds plan to put “huge amounts” into hedge funds – though transparency will become more of an issue.

“Pension funds, with their enormous resources, have started to allocate significant amounts of money into hedge funds, and they are planning to put in huge amounts,” said Greenwich Associates consultant Frank Feenstra.

The Connecticut-based consulting firm termed investments by pension funds as a “windfall” for hedge funds.

“Greenwich research suggests that hedge funds will experience rapid and continued growth as pension funds increase their allocations to the asset class,” added Greenwich consultant Woody Canaday.

Earlier this month the European Parliament passed proposals aimed at introducing a European Union-wide passport for hedge funds – though the trade body the Alternative Investment Management Association said it would take up with the Commission several “misconceptions and inaccuracies” about hedge funds apparent from the parliament’s report.

AIMA director Emma Mugridge was not immediately contactable for comment.

Greenwich interviewed 1,032 pension funds and endowments – along with 126 fixed-income investors as part of research into the hedge fund industry.

The study estimates that the 11 billion dollars currently allocated to hedge funds by US pension funds represents 0.2% of their assets. It said there are currently at least 6,000 hedge funds in operation with the number rising every day.

“Greenwich research indicates that target allocations for these pension funds are seven percent of assets for corporate funds and five percent for public funds.”

“If they achieve these targets, we’re talking allocations to hedge funds of at least 250 billion dollars,” said Greenwich’s Tim Sangston. “These levels would far exceed the capacity that exists in the hedge fund industry today.”

Greenwich said management fees and especially transparency could become an issue if the allocation to hedge funds rises.


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