CalPERS Decides to End Hedge Fund Investments
The California Public Employee’s Retirement System (CalPERS), with $298 billion of asset under management, plans to sell about $4 billion of hedge fund investments to simplify its portfolio and reduce investment costs.
In the fiscal year that ended June 30, CalPERS reported an 18.4% return on investment, far higher than its goal of a 7.5% average annualized rate of return. However, hedge funds during the same period earned 7.1% and racked up $135 million in fees.
After the financial crisis, CalPERS slowly has adopted a less risky approach. It has reduced its risky, money-losing investments and has concentrated on steady, income-producing commercial investments.
Hedge funds, which generally invest in a wide variety of speculative markets, and charge high management fees plus an additional percentage of the partnership’s profits, no longer fit well for CalPERS.
That seems to be the trend. A growing number of public pension funds in California and other states are saying “No” to hedge funds because of the high fees, risk and recent modest returns.
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