Pension fund execs write AIMA guide

Senior pension fund executives teamed up to write a new guide for institutional investment in hedge funds for the Alternative Investment Management Association in London.

Available for the first time on Tuesday at the organization's website, “A Guide to Institutional Investors' Views and Preferences Regarding Hedge Fund Operational Infrastructures” serves as a how-to guide for judging hedge fund managers on the quality of their governance, risk management, investment process, capital and ownership structure, and operations. The guide was published by the AIMA's investor steering committee.

The idea for the guide came from a small group of large institutional hedge fund investors that “interact on a fairly regular basis. We thought it would be good to share what we talk about when we get together and discuss hedge funds,” said one of the co-authors, Kurt Silberstein, senior portfolio manager-global equities at the $235.2 billion California Public Employees' Retirement System, Sacramento, in an interview. Mr. Silberstein wrote the investments chapter of the guide.

In addition to helping other institutional investors better evaluate hedge fund manager investments and operations, the guide's authors hope “hedge fund managers will get more clarity as to what institutional investors are looking for,” Mr. Silberstein said.

“Most investors focus on the sexy stuff, the investments, but the most important thing to concentrate on is the alignment of interests between the hedge fund manager and the investors and all the operational details of the investment. If you sign on with flawed terms with a manager, you only have yourself to blame if you run into problems later,” Mr. Silberstein added.

Mr. Silberstein's co-authors were Investor Steering Committee members Luke Dixon, portfolio manager-absolute return strategies for the £28 billion ($45.7 billion) Universities Superannuation Scheme, Liverpool, and Michelle J. McGregor Smith, CEO and director of British Airways Pension Investment Management, which manages the £14 billion ($21.5 billion) pension funds of British Airways PLC, London.

AIMA Research Committee members Andrea Gentilini, senior portfolio manager at hedge funds-of-funds manager Union Bancaire Privee, and Adrian Sales, partner and global head of operational due diligence at alternative investment consultant Albourne Partners, also contributed chapters to the paper.