Public Pensions Sour on Hedge Funds as Returns Drag

The video discusses the underperformance of hedge funds in the Massachusetts Public Fund and similar trends in other funds. It explores why pension funds invest in hedge funds despite mediocre returns, highlighting their appeal for long-term returns and reduced volatility. The video also examines how public pension funds are adjusting their return expectations and allocations, with some states reducing hedge fund investments. Finally, it addresses the potential for hedge funds to lower fees to remain attractive to investors.

What has been the general trend for hedge fund performance over the past decade?

• They have shown mediocre performance compared to traditional assets.

• They have consistently outperformed traditional assets.

• They have been unaffected by market changes.

• They have been the top performers in public funds.

Why do some pension funds still invest in hedge funds despite their recent performance?

• Hedge funds are the only option for pension funds.

• Hedge funds have no management fees.

• Hedge funds are less volatile and uncorrelated to the market.

• Hedge funds guarantee high returns.

What is one of the big issues facing pension funds and endowments going forward?

• Eliminating all hedge fund investments.

• Increasing allocations to hedge funds.

• Determining a realistic return target.

• Finding new hedge fund managers.

How are some pension funds responding to hedge fund performance?

• Cutting allocations and negotiating fees.

• Increasing their hedge fund allocations.

• Investing in more volatile assets.

• Switching entirely to stocks and bonds.

What might hedge funds need to reconsider to remain attractive to investors?

• Their investment strategies.

• Their fee structures.

• Their marketing campaigns.

• Their management teams.