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Asset Allocation

Massive UK Pension to Cut Its External Hedge Fund Portfolio in Half

The Universities Superannuation Scheme intends to utilize its in-house investment team over managers.
By Steffan Navedo-Perez

The UK’s largest private pension fund, the Universities Superannuation Scheme, plans to cut its external hedge fund holdings by 50%, said investment chief Simon Pilcher, according to a report from Bloomberg.

The pension’s rationale is credited to disappointing performance executed by its hedge fund managers, following a huge pattern where investors around the world redeemed nearly $100 billion from hedge funds in 2019, an increase in outflows of 163% from nearly $37.2 billion in 2018. Hedge fund managers struggled to identify pockets of alpha in a rising bull market, causing the industry to witness more fund closings than launches.

Instead of mostly utilizing external fund managers, Pilcher said the pension will now in some cases opt for an in-house team to execute its specific hedge fund strategies.

The fund’s pooled hedge fund investment vehicles comprised £1,760 million ($2,283 million) in assets by the end of last March (the latest data available) a small decrease from £1,862 million the year prior, according to its 2019 annual report.

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Don Steinbrugge, CEO of hedge fund consulting firm Agecroft Partners, advised earlier this year that the firm is predicting an uptick in hedge fund allocations from pension fund managers in 2020.

More than 4,000 hedge funds have been liquidated in the past five years, according to Hedge Fund Research Inc. Many investors have been opting for cheaper, high-beta indices that ride the bull market.

The fund began allowing members of its defined contribution plans to invest funds in private market assets beginning earlier this month. The pension’s private markets investments include 320 assets in infrastructure, property, private debt, and private equity

Pilcher was named CEO of the investment management unit of the scheme last May. He’s responsible for overseeing the fund’s £64 billion pension fund, providing benefits for academic staff throughout the United Kingdom. He was previously CEO of institutional fixed income and chairman of real estate at M&G Prudential.

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Home > News > Alternatives > Pushing for New Donors, Columbia Is Building a Climate School 
Alternatives

Pushing for New Donors, Columbia Is Building a Climate School 

The university made sweeping commitments to sustainability, including a carbon neutral pledge for 2050 and the appointment of a chief climate officer. 
By Sarah Min

Seeking fresh donors, Columbia University is mulling a proposal over the next several months to build a school dedicated to climate change. 

Columbia already runs the Earth Institute, the research firm it founded in 1995 that also investigates issues regarding environmentalism. But the research firm “has encountered structural challenges that limit its success and growth,” stated a December report from an advisory task force to the university president. 

Last month, the university decided to go forward with the climate change school plan, as part of a wide-ranging list of commitments to sustainability, according to a letter from Columbia President Lee C. Bollinger. 

“The Climate School has enormous fundraising potential,” the report read. “It will allow the university to make the greatest impact possible across all parts of Columbia, more so than if we were to simply enhance existing structures or fund large projects.” 

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Unlike the research firm, the Climate School can appoint faculty and subsidize its research with a tuition base, the task force wrote. A school can also develop a pipeline of alumni for future funding. 

The plan to build a separate school follows a dismal year for Columbia’s nearly $11 billion endowment, which returned just 3.8% in 2019. The poor showing not only trailed every other Ivy League endowment, it also lagged behind the national total institution average, which gained 5.3% in the same time period. It’s also just half the performance of the S&P 500, which increased roughly 7.6%.

Socially Responsible Investing 

Following similar pledges from other schools, including its sister school Barnard, Columbia also pledged to be carbon neutral by 2050 and is seeking divestment options for its portfolio. The school will also appoint a chief climate officer for the first time, the president said.  

Columbia is not the first school to consider incorporating socially responsible investing principles into its portfolio. Last week, Georgetown said it will divest from fossil fuels over the next decade. And at Harvard, the question of fossil fuel divestment is a point of contention among students, faculty, and shareholders. 

The university has seen a series of exits from its endowment recently. Last month, Columbia Investment Management Company CEO Peter Holland said he would retire later this year. Meanwhile, former chief investment officer Tim Donahue left the endowment nearly six months ago to head Hawaii’s Kamehameha Schools’ $8.2 billion endowment.

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