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EDHEC London Days

EDHEC-Risk’s Alternative Investment Days 2011, held at London’s Tower Hotel on 5th-6th April, showcased not only some of the latest EDHEC-Risk research but also gave asset managers the chance to explain how they were turning EDHEC’s insights into investable products. EDHEC itself will expand its range of investable indices with the creation of a new division, EDHEC-Risk Indices and Benchmarks, dedicated to this. This overview of the event draws out four key areas of discussion and some of the conclusions that were reached over the two days.

1. A remedy for pension deficits
Lyxor’s Nathaniel Benzakien opened the event with a sobering reminder of the vast size of many pension fund deficits. Subsequently, a panel of pension fund allocators discussed their approach to alternative assets and their allocation.

Kathryn Graham, director of the BT Pension Scheme, the largest UK pension fund, said it has 2.5% allocated to hedge funds through both funds of funds and single manager funds. The UK’s second biggest pension fund, USS, now has 4% of its £32 billion of assets directly invested in hedge funds according to Roger Gray, the chief investment officer. The second largest US scheme, CALSTRS, has so far only allocated 1.5% of its $150 billion assets, but this proportion will grow over time. CALSTRS only started doing so two years ago, with macro and currency managers, who will soon be joined by commodity specialists, its Investment Officer Carrie Lo said. Both of these schemes are emphasising uncorrelated strategies due to their historically and persistently high equity weightings.

Currencies are one asset class that appealed to the panel. Simon Cox of consultants Mercer said that non-profit making participants created opportunities in the market, especially for emerging market currencies, an exposure USS leaves unhedged.

Cass-CAIA Forum

By mid 2011 investors had allocated approximately $62 billion to hedge funds and total assets under management reached a new record of $2.04 trillion. During the same period funds of hedge funds saw a net withdrawal of $6.9 billion and the total assets under management remained around 20% below the peak of $800 billion reached in 2007.

To discuss these trends and explore how the landscape has changed for funds of hedge funds, Cass Business School and the Chartered Alternative Investment Analyst Association hosted a forum. Four expert panellists joined Steve Wallace, CAIA’s director of business development in EMEA, to discuss how the hedge fund industry is adapting. The November event came from a partnership between Cass and CAIA to promote education in the alternative investment area. The panel was moderated by hedge fund specialist Dr Nick Motson of the Cass Business School. The views of each panellist were personal and given in a private capacity.

The panellists included:

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