Should Public Pension Funds Reduce their Hedge Fund Allocations?

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Should Public Pension Funds Reduce their Hedge Fund Allocations?

Also see

 

  • Q3 2016 hedge fund letters
  • Q2 2016 hedge fund letters

 

Massif Capital’s Top Short Bets In The Real Asset Space [Exclisuve]

Screenshot 2022 08 10 18.57.51 1Since its founding by Will Thomson and Chip Russell in June 2016, the Massif Capital Real Asset Strategy has outperformed all of its real asset benchmarks. Since its inception, the long/short equity fund has returned 9% per annum net, compared to 6% for the Bloomberg Commodity Index, 3% for the 3 MSCI USA Infrastructure index Read More

CalPERS was the first high profile public pension to pull out of hedge funds, and was followed a year and a half later by one of the New York City retirement plans. Recently, the number of public pension funds exiting or reducing their hedge fund exposure has accelerated. We believe this trend will increase over the next 12 months due to growing political pressure on investment staffs of public pension funds from the media, union employees, and politicians. The pressure is being driven by unrelenting negative articles about the industry focused on the recent poor performance of various hedge fund indices and high fees.

This trend comes at a time when the average public pension fund is only approximately 74% funded based on an average actuarial rate of return of 7.5% according to a research report from Wilshire Consulting’s Investment Research Group. Many professionals believe that this expected return is unachievable in today’s low interest rate environment. If the actuarial rate of return was lowered to approximately 4.5%, which is what corporate pension funds are required to use, the unfunded liabilities of public pensions would skyrocket.