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Reuters – The UK’s largest pension scheme, the BT Pension Scheme (BTPS) could invest up to 20 percent of its assets in alternative asset classes including hedge funds, a senior executive in charge of its investments said.
Frank Naylor, head of investments at Hermes Pensions Management, told Reuters the pension fund had also reallocated $1.2 billion to two new fund of hedge funds (FOHFs) launched by its hedge fund boutique Hermes BPK.
Sky News – A US town has edged closer towards clawing back its losses to Wall Street swindler Bernard Madoff, securing a court order for £17m in assets.
The town of Fairfield in Connecticut suffered losses of about £28m from its pension fund to what has been called the biggest Ponzi scam in history.
Some 1,500 members who are trying to recover retirement money were granted the order to chase the assets from Madoff’s relatives and business partners.
SmartBrief – Carlyle Group is being investigated by New York prosecutors and the Securities and Exchange Commission for allegations that it made improper payments to get investments from the state’s pension fund.
The payments allegedly were made to intermediaries and might have totaled in the millions. The investigation involves several investment companies and a practice that has long been considered standard by hedge funds and private-equity firms.
New York (HedgeCo.Net) – Two high-ranking men who worked in the New York State comptroller’s office were arrested yesterday after it was discovered they took millions of dollars in kickbacks from private equity and hedge funds, said Attorney General Andrew Cuomo.
David Loglisci, who was the top investment officer of the state’s $122 billion pension fund, along with Henry Morris, who fund-raised for former comptroller Alan Hevesi, were nailed in a 123-count indictment, which included charges of money laundering, securities fraud and bribery.
It was discovered that over 20 transactions made by the pension fund involved kickbacks, with five of those coming from the renowned private equity fund The Carlyle Group.
Morris, who was released after posting a $1 million cash bail, allegedly received $13 million from The Carlyle Group, from investments that totaled $730 million.
“Morris used the fund as his own piggy bank and took approximately $30 million in fees for himself and his business partners on investments which Morris himself had a role in approving,” Cuomo said.
Lawyers for both men contend their clients are innocent, saying that all of the transactions benefited the pension fund and were agreed upon by outside financial institutions. The Carlyle Group has stated they have “fully cooperated with the New York Attorney General’s Office and is not a target of the investigation.”
If convicted, both men could face a life sentence in prison.
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New York (HedgeCo.Net) – Although confidence in the hedge fund industry has taken a hit, a large and notable UK pension fund has begun to place their trust into alternative investments. The West Midlands Local Authority Pension Fund, which manages close to $10 billion, was looking to diversify investments, and chose to allocate 8 percent into hedge funds.
In an interview with Reuters, management pointed out that although hedge funds may have had a dismal 2008, they still outperformed the equity markets. In addition, Chief Investment Officer Judith Saunders believes that hedge funds “have been forced to improve their practices and some of the weaker ones have gone.”
200 hedge funds who couldn’t withstand market conditions closed up shop last year in the United States alone, thinning out an industry that once managed close to $3 trillion. In addition, the unfavorable economic conditions exposed dozens of hedge funds that were running fraudulent schemes. Many companies feel now is the time to invest, with a number of strong funds that withstood the storm.
The Universities Supeannuation Scheme, UK’s second largest pension fund, is also pursuing diversification, confirming they would allocate 20 percent of their $32 billion in assets under management to alternative investments. Management recently told reporters “that current turmoil in the hedge fund industry represents a compelling investment opportunity for investors like USS who are able to take the long-term view.”
The West Midlands Fund chose investments that employ absolute return strategies, which are supposed to be less volatile than other strategies. Saunders has been pondering the idea of investing in hedge since late last year, when she stated the company was considering a 2 percent allocation.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
Reuters – The nation’s second-largest pension fund, the Universities Superannuation Scheme (USS), said it was sticking by a medium-term plan to double exposure to alternative assets such as hedge funds and private equity.
The 23 billion pound pension scheme confirmed the target as it announced its first appointment to a new hedge funds team on Monday.
USS currently has 10 percent exposure to alternatives, making it already one of the more adventurous UK pension funds.
Its plan to increase that to 20 percent, coupled with specific move to boost hedge fund investment, will be comfort to an industry which struggled with poor performance and heavy outflows during a turbulent 2008.
"We believe that the current turmoil in the hedge fund industry represents a compelling investment opportunity for investors like USS who are able to take the long-term view," said USS’s head of alternative assets Michael Powell.
There have been fears that conservative long-term investors such as pension schemes could be put off future allocations to hedge funds.
Reuters UK – The nation’s second-largest pension fund, the Universities Superannuation Scheme (USS), said it was sticking by a medium-term plan to double exposure to alternative assets such as hedge funds and private equity.
The 23 billion pound pension scheme confirmed the target as it announced its first appointment to a new hedge funds team on Monday.
USS currently has 10 percent exposure to alternatives, making it already one of the more adventurous UK pension funds.
Its plan to increase that to 20 percent, coupled with specific move to boost hedge fund investment, will be comfort to an industry which struggled with poor performance and heavy outflows during a turbulent 2008.
"We believe that the current turmoil in the hedge fund industry represents a compelling investment opportunity for investors like USS who are able to take the long-term view," said USS’s head of alternative assets Michael Powell.
Forbes – Britain’s second-largest pension fund, the Universities Superannuation Scheme (USS), said it was sticking by a medium-term plan to double exposure to alternative assets such as hedge funds and private equity.
The 23 billion pound ($32.79 billion) pension scheme confirmed the target as it announced its first appointment to a new hedge funds team on Monday.
West Palm Beach (HedgeCo.net) – When surveyed about what they think about fee levels and value for money offered by investment managers, investors believe that managment fees are too high.
Two surveys were conducted by bfinance in December, questioning institutional investors and asset managers from Europe, North America, and the Gulf Region.
"The results indicate that pension funds believe investment management fees are too high and need to come down, and a majority of managers seem to agree." David Vafai, CEO of bfinance commented.
With regards to hedge fund and fund of hedge fund fee levels, pension funds generally feel that all fees need to be reduced. 77% of respondents state their first priority is for lower base fees, followed by 52% who indicate their desire for performance fees to be reduced and for there to be an increase in hurdle rates. Also, 65% of investors say that these performance fees should be calculated over a four or five year period.
"Clearly, investors are still willing to pay performance fees to reward long-term skill but are no longer willing to pay active fees for beta or for ‘luck’", commented Olivier Cassin, Managing Director, Research and Development for bfinance.
Hedge fund managers agree that fees would likely go down and indicate they expect the median level for base fees for FoHFs to decline 9% to 95bps and for the median level of performance fees for hedge funds to decline 25% to 13%.
Vafai concluded, "Although the study indicates disenchantment with the industry in general, and disenchantment with Fund of Hedge Funds and GTAA managers comes out particularly clearly, the study also rather paradoxically suggests that allocations to FoHFs, as well GTAA, Infrastructure, Real Estate and Private Equity FoFs are set to increase in the future. This confirms the results of our recent study on the impact of the crisis on pension fund asset allocation."
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CNNMoney.com – ACF Industries and Bank of America Corp. (BAC) are suing hedge fund Steel Partners, accusing the fund of fraud by failing to tell investors of plans to go public, Reuters reported Wednesday.
Reuters says ACF, which court documents say is affiliated with Carl Icahn, invested $15 million with Steel Partners Offshore Fund Ltd, which became Steel Partners II (Offshore) Ltd. In the suit, Bank of America, acting as trustee for ACF’s employee pension fund, accuses Steel Partners of failing to give proper notice of plans to become a publicly traded partnership.
Voiceof San Diego – San Diego County’s pension fund is slashing its $1 billion hedge-fund portfolio and acknowledging that the investments it once championed have become too risky and no longer make sense.
The board of the San Diego County Employees Retirement Association voted unanimously Thursday to reduce the size of its hedge-fund portfolio by more than half. That will free up $600 million, half of which will be held as cash. The rest will be reinvested in the portfolio.
The pension board also agreed to curb the aggressive strategy the $7.5 billion fund used to finance its hedge fund investments. Under the "alpha engine" strategy, the county bought financial derivatives known as swaps that were essentially bets on the market. Much like bets on a Chargers game, the swaps cost nothing initially, which freed up cash for hedge fund investments. When the market rose, the swaps made money, but in recent months, they cost the pension fund millions of dollars. Last month, the board voted to free up $100 million in cash to protect against further declines.
Hartford Business – State Treasurer Denise L. Nappier said she plans to approve rule changes by January allowing her to allocate up to 8 percent of the state’s $20 billion pension fund in nontraditional investments such as hedge funds.
The move marks a departure from a more conservative investment strategy and comes shortly after the Connecticut funds lost nearly $5 billion in pension assets in the depressed market.
The shift in approach also comes when the hedge fund industry is under stress. The sector’s total assets declined by more than 20 percent between June and October, and the unraveling of Bernard Madoff’s $50 billion Ponzi scheme this month has spotlighted what many see as a general lack of transparency in the industry.
Still, Nappier said investing in hedge funds and other alternative instruments will allow the pension plan to reduce volatility, produce slightly higher returns and create better diversification.
