Big institutional investors around the world are cautiously investing more capital in hedge funds over the next 12 months, with a view to increasing allocations over the longer term, according to a survey by the alternatives research firm Preqin. Preqin, which has offices in London and New York, surveyed 50 of the largest institutional investors in hedge funds during July and published a summary report in August. The report indicated a modest increase in support for hedge funds this year, with a more significant increase in later years. Clearly the possibility of a doubledip recession is weighing on the minds of investors in Europe and the US, as perhaps elsewhere. For hedge fund managers, the experience of the past two years of the global financial crisis caused them to become more reliant on institutional investor support, rather than its traditional base of high-net-worth individuals.
The art of dynamic asset allocation
There is no ideal asset allocation. This is because resources – particularly costs and knowledge – dictate that every fund’s position will be different, according to Carl Hess, global practice director of Towers Watson Investment. If Hess was starting with a blank slate, he would advocate about 10 different positions – from equities, to skill, to commodities – among return-seeking assets. “This is more diverse than anyone has been to date,” he says. “Good allocation has a lot to do with resources, internal and external, but if a fund is willing to raise the game, there are a lot of opportunities,” he said. Asset allocation depended on the time horizon of the investor, Hess said, explaining that an endowment with a long time horizon would be very different to a defined benefit fund that was riskaverse or is closing. But, he said, probably the most important criteria affecting appropriate asset allocation is resources.
Chris Cuffe’s call for a ‘target benefits scheme’
The Australian superannuation industry would resemble UniSuper if Chris Cuffe had the chance to build it from the ground up. In remarks made at the recent annual conference of the Fund Executives Association Ltd (FEAL), the builder of Colonial First State took it upon himself to mention a number of industry ‘elephants in the room’, one being most members’ compete lack of preparedness to take responsibility for investment decisions. Cuffe talked up the merits of a ‘target benefits scheme’, called a ‘collective defined contribution scheme’ in some countries, in which member benefits ascribed to a defined benefit-like formula, but the investment risk was borne by the collective membership rather than employers.
Heap of the top: meet UBS GAM’s new boss
Ben Heap was in Macquarie’s infrastructure team in the 1990s, working alongside Nick Moore and Michael Carapiet at the start of its “golden run”. He’ll be hoping he can bring some of the same magic to his new role running the Australian arm of UBS Global Asset Management (UBS GAM). Heap, who has spent almost all of his three years at UBS GAM running its infrastructure investment unit in New York, is taking over from Paul Bolinowsky, who is said to be relieved to again be focusing on institutional business development. Not surprisingly, infrastructure is near the top of the list of Heap’s immediate priorities for the Australian business.
For VFMC, alternatives boom in the gloom
The $34 billion Victorian Funds Management Corporation (VFMC) has reaped big rewards from its belief in the hedge fund managers it backed five or more years ago. In its latest performance figures, which show a headline return of 12.7 per cent against the 10.9 per cent gained by its benchmark in the year to June 30, VFMC’s absolute return and private equity portfolios were the standout performers. The absolute return portfolio boomed 27.1 per cent over the 5.9 per cent gained by its benchmark, the UBSA Bank Bill index plus 2 per cent annually, while its private equity book paced 26.5 per cent over the 13.05 per cent achieved by its benchmark, the ASX 300 Accumulation Index. Justin Arter, VFMC’s CEO, said the results were due to the “snap back” performance of its hedge fund managers, many of whom experienced substantial client redemptions at the height of the financial crisis.
LUCRF launches new risk regime
In a response to members’ risk aversion in the dark days of the financial crisis, the $2.5 billion LUCRF Super has overhauled its investment options and will begin running four major new strategies in the coming weeks. On the investment risk spectrum, the options range from high-growth through to conservative, and run in alignment with four set splits between growth and defensive assets: 90/10, 77/23, 50/50 and 30/70. Greg Sword, CEO of the industry fund, said the new options were introduced to provide members with options that stood a better chance of satisfying their risk appetites.
Big scale shapes AustralianSuper’s future
Australian super funds are still organising their equity portfolios “like they did 10 years ago” when they enjoyed none of the scale they do today, said AustralianSuper chief investment officer Mark Delaney, as he announced a search for four new positions in his investment team last month. The $33 billion fund will search for its first dedicated head of equities, as Delaney vowed to “explore all the options” for implementing the share portfolios more efficiently. AustralianSuper has already gone 50 per cent passive (through Industry Funds Management which it part-owns) and halved the active manager list in its Australian equities portfolio.
Big funds manager seeks EOIs for custody, admin
An $11 billion Australian funds manager is seeking expressions of interest from would-be suppliers of custody and investment administration services.
A job for Jake Jodlowski…
The long-time general manager of investments at United Funds Management, Jake Jodlowski, hasn’t let the grass grow under his feet after completing a post-merger handover to IOOF chief investment officer Steve Merlicek last week.
Brisbane deal shows Telstra Super’s unlisted tilt
Telstra Super’s joint acquisition of Brisbane Square with Charter Hall reflected the fund’s aim to overweight its $1 billion property portfolio to unlisted assets, Jim Christensen, CIO at the $10 billion fund, said.
…as IOOF hires asset allocation chief
IOOF chief investment officer Steve Merlicek continues to piece together a team to oversee $12 billion in multimanager funds, tapping Russell Investments for a strategy and asset allocation chief. 
