Often times, retail trends start in the institutional market.
On Monday the largest public pension plan in the country unveiled
plans to eliminate hedge fund investments from its portfolio, "as part of an ongoing effort to reduce complexity and costs in its investment program." Is this a sign of things to come for the hot, alternative side of the mutual fund industry, much of which is built on hedge fund-like strategies, often by former or current hedge fund managers?
What's an advisor to think of such alt funds when the interim chief investment officer, Ted Eliopoulos, of the $300-billion California Public Employees' Retirement System is saying that hedge funds may be too complex and too costly?
Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at CalPERS' size, the ARS [Absolute Return Strategies] program is no longer warranted.
The media debate about the future of hedge funds themselves has already begun. Anna Prior of the Wall Street Journal reports
that financial advisors "say they aren't rethinking" using hedge funds directly in clients' portfolios. On the flip side, the WSJ's
Justin Lahart argues
that "the high-water mark for hedge funds may have passed."
The news of CalPERS'
decision, followed quickly by the appointment
of its next chief investment officer, has spread widely enough that it'll be hard for advisors to ignore, let alone miss. Bloomberg
, Business Insider
, the Los Angeles Times
, the New York Post
, the New York Times
, Pensions & Investments
, the WSJ
and others have all covered the news.
Neil Anderson, Managing Editor
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