Fund of Hedge Funds Perform Swimmingly In Pooled Pension Funds

Date: Tuesday, January 30, 2007
Author: Dailyii.com

Pooled funds of hedge funds performed better over the long term than other pooled pension fund allocations, according to Mellon Analytical Solutions. In its latest pooled pension funds update, Mellon found that over a five-year period that ended in September 2006, its pooled fund of hedge funds universe returns 10% a year, compared with 9% a year for U.K. equity pooled funds and 7.5% for overseas funds. The funds of hedge funds, according to Mellon, accomplished this with a deviation of 5.3%, compared with deviations of 14.8% and 16.1% per year for U.K. equity funds and overseas funds, respectively. Notes Mellon statistics manager Daniel Hall, "The results from our analysis indicated that over the five-year period, a reduction in overall equity weightings in favor of an allocation to fund of hedge funds would have reduced risk levels and boosted performance within a balanced or multi-asset structure." Mellon found, however, that property was the best performer over the five-year period at 14.2% a year, with a standard deviation of only 3.0%, while FoHFs excelled in the longer term. Property was also the best performer in 2006, according to Mellon, returning 20%, followed by Europe equities ex U.K. (19.7%), Pacific ex Japan (18.8%), U.K. equities (16.8%) and emerging markets (15.9%). Mellon did not provide FoHF figures for 2006. Incidentally, U.K.-based GLG Partners was named one of the worst performers in the balanced and U.K. equity sectors.