A rush into hedge funds during the last decade has produced poor returns for North American pension plans, according to analysis for the Financial Times. In the past 10 years institutional investors have been under pressure to allocate more of their assets to expensive alternative investment managers, away from run-of-the-mill stockpickers.
However, figures show that pension plans have failed to back the industry’s brightest stars, in aggregate falling short of returns showcased by hedge fund indices. Between 2000 and 2008, according to academics at Maastricht University and Yale University, US pension plans received just 1.9 per cent a year on average from their investments in hedge funds, after fees. Canadian pension plans made 0.6 per cent a year from hedge funds, during a period when Canada’s stock market returned an average 2.9 per cent each year.
Over the same period the average hedge fund produced an annualised return of 5 per cent, according to the Hedge Fund Research index. The results could lead to a reassessment of the pension industry’s push into hedge funds as it reacted to a decade of poor stock market performance.
Financial Times / Can Large Pension Funds Beat the Market?