A look at some stats and stories on Hedge Fund Redemptions from 2016.
At the beginning of this week, JP Morgan published its 2017 Institutional Investor Survey, which revealed despite hedge funds’ underperformance in recent years, 81% of respondents said they made new allocations to hedge funds in 2016, and nine out of ten respondents plan to increase or maintain their current allocations during 2017. On the other hand, the report notes that approximately 80% of respondents redeemed from at least one hedge fund in 2016, but this number was little changed from the prior year.
However, despite this data, in the past few days, several high-profile institutional investors have rolled back hedge fund allocations in an attempt to reduce fees and improve investment performance.
Hedge Fund Redemptions – Pension Funds
Reuters reports that the Massachusetts state pension fund, which has approximately $5 billion allocated to hedge funds, has pulled money out of Brevan Howard in yet another high-profile blow for the industry.
The Massachusetts state fund has $62.7 billion in assets under management, dwarfing the $12 billion Brevan Howard and it appears that pension trustees have become disappointed with Brevan’s poor performance in recent years.
According to Reuters, the Massachusetts’s pension fund and a return of 8% last year with his basket of more than two dozen hedge funds returning 4.4%. For some comparison, the HFRI Asset Weighted Composite Index gained 3.1% last year, and Brevan ended the year with a gain of 3% following losses in 2014 and 2015. Since the Massachusetts fund invested in 2011 Brevan has only produced a return of 1.4% per annum.
The Massachusetts state pension fund is aiming to save $38 million per annum by cutting costs and negotiating fees with investment providers. It seems that the Brevan divestment is part of this cost-cutting drive. However, Brevan has also fallen out of favor with state funds in Rhode Island and New Jersey in recent months.
Meanwhile, Harvard University’s endowment is also reconsidering its hedge fund position. According to Bloomberg, Harvard Management is “exploring investing relationships” with groups overseeing the endowment’s a billion-dollar so-called internal platform, which included equity and bond funds, according to a 2015 internal McKinsey & Co. report reviewed by Bloomberg. According to Harvard’s fiscal 2016 annual report, the endowment had $6 billion allocated to external hedge funds.
Harvard Management is planning to cut around 50% of its staff base of 230 and shut its internal hedge fund unit according to a statement issued last month.
Harvard’s endowment produced an average annual return of 5.7% in the ten years through June 30, among the worst in the Ivy League.
As reported earlier this year, CaLPERs shocked the investment world after it announced a change in its alternatives allocation strategy.
Take a look at and download this no obligation teaser. And if you want to buy the last issue, sign up for a whole year, or just find out more about what’s on offer, click here. One fund manager in the previous issue produced a return of 85% for his investors last year.