MPI Research on Institutional Hedge Fund Investing Widely Reported

In light of CalPERS’ termination of its ARS hedge fund program, Risk Magazine asked MPI to look at the relationship between scale, selection and impact of allocations to hedge funds on the portfolio risk and return profile at pension funds. Testing a hypothetical pension portfolio with allocations to hedge funds of 1%, 5% and 10%, the study finds significant positive benefits on total returns and risk-adjusted returns of hedge fund allocations at the 5% and 10% levels, though negligible impacts on the risk and return profile at the 1% level. The findings contribute to the industry debate about the role of hedge funds in defined benefit plans, including issues of scale and selection, as well as fee structure challenges and the need to evolve. The research appeared first in Risk Magazine’s November issue, and was later referenced in Asset International’s Chief Investment Officer, DailyAlts and widely in the Twitter sphere. For the full research, see MPI’s Research Corner.