Ross MartinWarakirri Asset Management and FRM are two hedge fund-of-fund (HFoF) providers that have lost mandates with the $2 billion Media Super in an incisive review of its hedge fund program.

Ross Martin, chief executive officer of Media Super, said the fund was redeeming a $40 million mandate with FRM, and a $15 million allocation to the Mesirow HFoF offered in Australia by Warakirri, and would invest the freed-up capital in cash for the short-term while the investment committee and board continued to review hedge funds.  

The next redemption would be the $40 million on its way from the BT Global Return Fund, which holds $871 million under management and is being wound down after Grosvenor, the underlying HFoF manager, imposed lock-ups in late 2008 after being hit with a succession of redemption requests.

Media Super’s remaining hedge fund mandate, a $20 million allocation to HFoF manager Quellos, was currently the subject of review, Martin said.

“Before BT’s decision to close the [Global Return] fund, the investment committee resolved to doing, during the course of this year, a review of our overall commitment to hedge funds,” Martin said.

“We’re not pleased with HFoFs – not necessarily their absolute numbers, but their inability to do what they said they would do, which was deliver positive returns in all markets.”

Fiona Trafford-Walker and Jonathan Stagg of Frontier Investment Consulting, Media Super’s asset consultant, were assisting the fund with its review, Martin said.

He said the likelihood of future allocations to hedge funds was being questioned and that, at this stage, any such mandate would probably not be given to a local distributor of an offshore product. Instead, the fund would aim to invest directly in hedge funds.

“The BTIM arrangement highlights the issue,” Martin said. “Grosvenor isn’t winding up – the local distributor doesn’t see a future in the product irrespective of what the underlying manager is doing.”

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