Pension funds will more than double their use of hedge funds within the next four to five years, according to Leighton Strader of Grosvenor Capital Management.
Speaking at the IMN Corporate Pension Funds Summit in Palm Springs, Strader expects the $400bn hedge fund industry to grow to $1tr during the next five years. But one problem delaying hedge fund take-up is the lack of knowledge on the part of consultants, he added.
It's like a dance where all the boys sit on one side of the hall and the girls on the other, he said.
The problem is that the consultants in the middle don't know enough to get both sides together.
Another issue highlighted was the number of hedge fund managers. He added that with larger hedge fund managers, pension funds have a problem with the higher fees, a lack of transparency and longer lock-in periods associated with them. And with the smaller managers, it was imperative to undertake proper due dilligence work prior to hiring them and to constantly monitor their progress, he continued.
According to Strader, the Long Term Capital Management fiasco of the late 1990s was a positive thing.
As far as the smaller pension plans go, there's still some smoke because of LTCM. But it was good because it made people pay attention to what's going on, he said.
By Geoffrey Ho
The British Medical Association (BMA) has warned chancellor Philip Hammond to reform the NHS pension scheme rules or doctors will reduce their working hours.
The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.