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CalPERS hedge fund exit may trigger soul searching by Asian pension funds, says Northern Trust
The California Public Employees’ Retirement System’s (CalPERS) decision to exit its hedge fund investments is expected to trigger soul-searching on the part of the boards of Asian pension funds
Bayani S Cruz 25 Sep 2014
The California Public Employees’ Retirement System’s (CalPERS) decision to exit its hedge fund investments is expected to trigger soul-searching on the part of the boards of Asian pension funds on the future role hedge funds will play on their respective portfolios.
 
In an interview with The Asset, Carl Lingenfelter, chief administration officer of Northern Trust Hedge Fund Services, says: “I think all of the large pension funds will have to explain to their boards why their hedge fund allocation is performing or not performing and explain the things that CalPERS raised around fees and strategy as well as from their scale standpoint. CalPERS thought they didn’t think they could get enough scale.”
 
Lingenfelter explains the US$4 billion in assets withdrawn by CalPERS from its hedge fund investments is relatively small compared to the US$3 trillion total size of the global hedge fund industry, and is not expected to impact the industry in the short term.
 
“There might be a handful of funds that were very heavily reliant on CalPERS but I don’t think it will have a major impact across the industry because they (CalPERS) were fairly diversified particularly around the number of managers,” he notes.
 
CalPERS’ decision to withdraw from hedge funds fits into the overall industry trend where investors are demanding more transparency and accountability as well as further control over the assets either through separately-managed accounts or working with other providers, Lingenfelter says.
 
CalPERS announced on September 15 that it will eliminate its hedge fund programme, known internally as the absolute return strategies (ARS), as part of an ongoing effort to reduce complexity and costs in its investment scheme.
 

    

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