Will Wainewright

13/04/2011 Author: Will Wainewright

Hedge funds and pensions are learning to get along

Pre-2008, it was simple. A significant portion of institutional investors looked longingly at hedge fund returns but were put off by the assumed risks involved. Hedge funds returned the glance with interest, gazing at the assets on offer, but decided the operational rigours involved – together with their already ballooning AuMs – were not worth the effort.  

Times have changed. The relationship has not so much thawed as melted since 2008, with institutions capitalising on a more compliant, and perhaps less dogmatic, hedge fund industry to demand greater accountability. Managers relented, eager to rebuild dented AuM. The increasingly institutional investor-base of many hedge funds demonstrates how successful this entente has been.

Despite this, hedge funds still remain a mystery to many investors. Hedge funds made simple, produced last month by the National Association of Pension Funds (NAPF), is the latest attempt to increase understanding of a traditionally mysterious industry, with similar education-focused initiative planned by other agencies in the coming months.

Joanne Segars, NAPF’s chief executive, told HFMWeek that the response from the industry has been very positive so far, with nearly 1,800 members of the pension industry owning copies. Whether that interest results in further allocations remains unlikely, but increased understanding can only be a good thing.

Earlier this year, HFMWeek revealed that formal hedge fund education at pension funds was at an all-time high. Initiatives like the NAPF’s will only add to this growth, turning longing gazes into solid relationships. Proof, if ever it were needed, that love works in mysterious ways.

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