US - The City of New Haven's Employee Retirement Fund (NHERF) has invested US$8m in a hedge fund replication strategy based on exchange traded funds (ETFs) marking the scheme's first foray into hedge funds.
The investment will be through a managed account vehicle provided by IndexIQ, which will invest in a range of ETFs.
Ameriprise Financial Services - which advised NHERF in this deal - consultant Derek Ciampini said: "In today's economic environment, it is especially important for trustees to be open to examining alternatives as part of their investment allocation to ensure it has the proper diversification to meet the evolving needs of their fund."
IndexIQ executive vice president Anthony Davidow said: "The City of New Haven was contemplating adding hedge fund exposure to its Retirement Fund, but was leery about the recent difficulties of other public funds. The Trustees were attracted to the investment merits of hedge funds, but were concerned about liquidity and transparency."
Hedge funds replication products have been used by pension funds in the past to get a first exposure to the asset class, while at the same time maintaining a higher level of liquidity and transparency.
Last year a growing move by pension funds towards hedge fund replication prompted a warning they could be missing out on the returns offered by direct allocations to the asset class (Global Pensions, September 1, 2008).
According to the latest Credit Suisse/Tremont Hedge Fund Index hedge funds performance were up 2.11% in November and 17.53% year to date.
David Hutchins looks at the recent FCA interim market study and asks better value can be delivered to members.
PP research finds disagreement on whether transfers to SSASs are the problem and should be barred.
Aon Hewitt, Mercer and Willis Towers Watson have joined forces in calling for measures to tackle transparency and competition issues raised by the Financial Conduct Authority (FCA).
This week's top stories included coverage of the DWP's much-anticipated green paper on defined benefit (DB) regulation, and ARC Pensions Law's plans to open a Leeds office.