Britain's Universities Pension Boosts HFs, Seeks Infrastructure

The £30 billion universities pension fund aims to up its exposure to short-term computer-driven hedge funds that try to profit from volatility by betting on turbulent market moves.

(November 10, 2010) — Britain’s £30 billion ($48 billion) universities pension fund is planning to up its exposure to short-term computer-driven hedge funds to deal with volatile markets, Reuters is reporting.

According to Luke Dixon, portfolio manager in absolute return strategies at the Universities Superannuation Scheme (USS), the fund this year has increased its exposure to short-term commodity trading advisers (CTAs), which tend to outperform many other hedge funds during short-lived market fluctuations. The fund aims to raise that exposure in the months ahead. “We intend to use (them) dynamically. (They) should help us in highly volatile markets. Our expectation is that we’ll continue to go through volatile (conditions),” he told the news agency during the Hedge 2010 conference in London.

USS began putting money into hedge funds last year. So far, it has invested £950 million with 15 managers. It’s in the process of increasing its exposure to macro hedge funds focused on emerging markets and commodities. Currently, the fund has roughly 40% of assets in macro funds, 40% in long-short equity, 15% in credit trading funds and 5% in managed futures or CTAs, Reuters reported.

Looking ahead, the fund plans to commit up to £2 billion to hedge funds over five years.

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Separately, the USS, which invests £800 million of its £30 billion assets under management in infrastructure, aims to gain more exposure to direct and co-investment strategies. Roger Gray, chief investment officer at USS, told the Financial Times that the attraction of direct ownership comes from gaining a long-term asset.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

HFs Revise Infrastructure, Staffing, and Pay to Attract 'Sticky Money'

A recent survey by Alpha Search Advisory Partners has revealed that while hedge funds are reworking policies to lure money from institutional investors, change to the pay structure of marketing executives at hedge funds has been slow.

(November 10, 2010) — Hedge funds are reworking their infrastructure, staffing, and compensation policies to gain “sticky money” from pensions, endowments, and other institutional investors, according to a study conducted by hedge fund executive placement agent Alpha Search Advisory Partners.

Yet, because change to the pay structure of marketing executives at hedge funds has been slow, the survey notes that the interests of marketers and hedge funds may not be aligned, with marketers out-of-sync with hedge funds’ push to market to such institutions.

The study targeted 47 in-house marketing professionals at alternative asset management firms, primarily hedge funds, including only firms with assets under management of at least $1 billion. The findings revealed that only 6% of respondents had both a discretionary and formulaic component to their incentive pay, allowing marketers the ability to pursue institutional assets.

“This study reflects this need for more attention that comes as a result of market events over the past two years,” Alpha Search Chief Executive Robert Olman told aiCIO. “Post Bernie Madoff, risk management has become a major issue, as investors have become more savvy in protecting their assets,” he said. “For example, now investors want to meet more than the chief risk officer. They want to see more than his reports and how risk is managed in the portfolio. They want to see how the operations are controlled and monitored within the fund,” he said. Olman noted that hot money investors like fund of funds are less attractive than large institutional investors, which, hedge fund managers believe, will weather the storm better and not redeem as quickly, explaining the attraction to larger institutional investors.

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Money from institutional firms is often referred to as “sticky” because of the fact that pensions and endowments stay put for longer periods. Consequently, institutions take more time in the decision-making process, which comes to 12 to 18 months on average. “Anyone who focuses on institutional investors — they’re sticky money because they’re looking years down the road instead of month by month, with due diligence much more lengthy and intensive,” said Philip Uranga, an associate recruiter at Alpha Search. “Therefore, marketers have to go through a much larger courtship process – there’s a lot of transparency that needs to be provided.”

Uranga added that a rocky fundraising landscape has led to greater demand for marketers and high turnover among them. He said the study also uncovered a lot of movement within the environment of hedge fund marketers, with more than 50% of those surveyed having changed employers in the last 24 months.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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