The California Public Employees’ Retirement System (CalPERS) is forging ahead in the risky arena of hedge funds. The nation’s largest pension fund announced this month it would double its hedge fund assets from $1 billion to $2 billion.
CalPERS, which began investing in hedge funds four years ago, calls the program a success.
“Hedge funds help us accelerate our returns during difficult economic times,” said Rob Feckner, chair of CalPERS Investment Committee, in a prepared release. “Adding hedge fund-of-funds to our portfolio will increase our bench strength and help us access more investment opportunities efficiently.”
This decision is a boost for other hedge funds because market watchers think pension fund managers will follow the lead of CalPERS.
Conrad Ciccotello, a professor at the Robinson College of Business at Georgia State University, told The Sacramento Bee:
“They’re a bellwether institutional investor. Their entry was a kind of signal that it is safe to go into the park.”
Indeed, an unrelated report released last week, found that institutional investors are planning next year to put more money into private equity and hedge funds, which are similar to mutual funds, but are considered riskier for how they “bet” on whether certain stocks and equities will fall.
The report – issued by Coller Capital, the large private equity secondaries investor – found that more than half of institutional investors in private equity expect to increase their exposure to alternative assets overall during the next year, with 43% expecting to increase their allocations to private equity and 45% planning to do the same with hedge funds.
The Coller report survey more than 100 private equity investors worldwide in August and September.
Outside of hedge funds, Coller found that the good news for 2005 fund-raisers is that more than half, or 53%, of LPs expect to increase the number of their GP relationships, with this figure rising to 62% among Asian LPs. Moreover, when asked where the best opportunities for investment by GPs would be over the next year, LPs offered the following ranking: European buyouts, Asian buyouts, American buyouts, American venture, Asian venture and European venture.