Asset AllocationSeptember 19, 2014

Blackstone: CalPERS is Right to Dump Hedge Funds

A long-term partner of the US’ largest pension has backed its decision to exit hedge funds.

Reported by Featured Author

Blackstone President Tony James has supported the decision by the California Public Employees’ Retirement System (CalPERS) to wind down its $4 billion hedge fund program.

Blackstone helped the pension allocate an initial $1 billion to hedge funds in 2001, according to Bloomberg. Blackstone is the largest allocator to the asset class with $61 billion invested in hedge funds.

Earlier this week, CalPERS CIO Ted Eliopoulos announced the pension would be exiting hedge funds entirely, citing the ARS program’s lack of scalability, as well the complexity and cost of hedge fund investing.

Speaking at a private equity event in New York yesterday, James said CalPERS’ move was “wise” given the poor returns generated by the allocation, dubbed “Absolute Return Strategies” (ARS) by the pension.

He added: “A lot of people think about hedge funds as a way to get higher returns. Hedge funds are a way to play the stock market with somewhat lower volatility and somewhat lower returns. You don’t expect hedge funds to get shoot-the-lights-out returns. You save that for private equity and for real estate.”