Hedge Fund Reader : US pension funds find investing in Hedge funds rewarding

August 13, 2005

US pension funds find investing in Hedge funds rewarding

Off late more and more pension funds have been seen investing in hedge funds. This is in contrast with the previous trend of investing in long only portfolios. Pension funds had a severe setback when the technology market crashed in the late 1990’s and early 2000’s. From then on their investment in alternative investment vehicles like hedge funds has seen a dramatic increase. In 2001 less than 1% of the pension fund assets were invested in hedge funds. And now this number has grown to over 3%. This is good news for hedge fund managers as they get fresh inflow of money in a sluggish market. However all is not smooth sail for either of the parties involved. Hedge funds are expected to pay the asset management fees along with performance fees to the fund managers of hedge funds as per requirement. This is something they did not have to pay when they were investing in mutual funds. On the other side, hedge funds view the pension funds as a coveted lot and thus have to bow to there wishes to a certain extent. Whichever way the future rolls, this symbiotic relationship is currently looking like a good combination for both the parties involved. Hedgeco.net reports:

“But with rising level of pension fund investments in Hedge Funds also comes other requirements, now pension fund managers have to play by the rules of hedge fund managers, and must pay both management and performance fees to hedge fund managers.”

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August 13, 2005 in Emerging Markets | Permalink