CalPERS to Launch Hedge Fund

Date: Friday, April 17, 2009
Author: Benefits Canada

Giant California pension fund CalPERS is considering creating its own internal hedge-fund.

According to public documents from CalPERS, the fund is looking to provide start-up money to new and relatively unknown teams of traders and portfolio managers, with hopes of spinning this investment into a bigger, independent firm that would serve other clients.

The proposed seeding program is designed to counteract declining hedge fund returns and give CalPERS more control over its money. This strategy mirrors an approach the US$175 billion pension fund has already taken with private equity managers.

The hedge fund proposal is part of a comprehensive review of CalPERS' $5.9 billion in direct investments with 26 hedge funds and nine other fund of fund firms it deals with.

Coincidentally, the move to start its own hedge fund comes during a time when institutional investors are demanding more for less from their asset managers. CalPERS and other large investors have been demanding fee cuts from existing hedge funds.