Pension funds undeterred by Amaranth

Date: Thursday, September 28, 2006
Author: Damian Clarkson, Globalpensions.com

GLOBAL - The massive losses incurred by Amaranth Advisors has not triggered a hedge fund sell off from large pension funds.

Reports claimed many pension funds that suffered losses when Amaranth lost US$6bn - including the Pennsylvania, New Jersey and Massachusetts funds - would not move out of hedge funds, and were merely waiting to see the overall result the Amaranth's collapse.

Earlier high profile collapses had seriously impacted the hedge fund industry as a whole, most notably the 1998 collapse of Long Term Capital Management.

"We have had some big blow ups in the past - like LTCM - which everybody remembers and knows about, that really hurt hedge fund markets for some years," said Peter Jan de Koning, who runs PGGM’s hedge fund portfolio.

"In some of the local press there have been stories about hedge funds being speculative, high risk, and that they’re dangerous. Our experience has been that they have preserved capital, they are not risky and have provided a stable return," de Koning said in an earlier interview with Global Pensions.

"Hedge funds can’t defend themselves. Investors have to approach them. There are strict laws, especially in US, that prevents them from seeking publicity, as that is seen as solicitation of clients."

De Koning conceded there was a "slightly higher" operational risk, and added: "Hedge funds don’t offer transparency to a level that some would like, they are slightly less regulated - but not unregulated - than normal investment vehicles and that scares a lot of people."

David Zobel, head of hedge fund strategies at BlueBay Asset Management, said hedge funds had always drawn strong views from investors.

"It’s one of those businesses where there have been extremes," he said. "Overall, if you look at it long term, it’s a steadily growing business that has performed fairly well. There has been a lot of good and bad."

"There has been a love-hate of the hedge fund industry."