09/07/2008

Nr Carolina college shifts to HFs

The $500m endowment fund for North Carolina liberal arts institution Davidson College is shifting its investments away from funds of hedge funds (FoHFs) in favour of direct investments in hedge funds.

“We have been in the process of moving from FoHFs to single manager funds for some time and we are still looking for a few new funds,” said Nathan Mease, Investment Analyst at Davidson College.

The most recent additions to the portfolio were single manager hedge funds run by Highline Capital Partners and Mason Capital.

The endowment redeemed its assets from Quellos Investment Management, a fund of hedge funds, earlier this year, according to the minutes of the investment committee meeting from April. Other managers currently in Davidson’s portfolio include Viking Global, Owl Creek, Indus Capital Partners and Bay Resource Partners.

“We are fairly far along the transition process and close to wrapping it up,” Mease said, noting that the endowment is still meeting managers and will probably make a couple of additional allocations.

“We also have a small investment in a distressed hedge fund with Blackstone Alternative Asset Management, which we are considering increasing, but we are waiting until the distressed cycle is fully ready,” Mease added.

The portfolio now includes 15 managers and the endowment currently invests a little over 20% of the portfolio in hedge funds, however, its target allocation is actually a hefty 25%.

“Hedge funds is an area that our trustees are very involved with and that our CIO has a very good knowledge of, so everyone is very comfortable with it and we feel that we know good managers and can get good performance,” explained Mease.