CHICAGO Many institutional investors are put off by the lack of transparency and high fees of alternative asset classes, according to a white paper by think tank CREATE Research, published by Northern Trust.
Institutional investors worldwide allocate just 3% of their portfolios, on average, to hedge funds, private equity, real estate and commodities. Half of the 300 fund managers and pension plan sponsors CREATE surveyed said they do not invest in hedge funds, and more than a third have no plans to invest in hedge funds at all. The paper does not provide data about other asset classes.
Before making big allocations to alternatives, investors want to see steep improvements in the risk-return characteristics of investing in alternatives. They also want something done about lack of transparency, high fees and illiquidity in these asset classes, Amin Rajan, the papers author and CEO of CREATE, said in a news release. He could not be reached for comment.
Renaissance says its not selling stake
NEW YORK Renaissance Technologies Corp., a New York-based hedge fund firm with more than $30 billion in assets under management, isnt considering the sale of a minority stake to an outside investor, said Mark Silber, a vice president with the firm. Mr. Silber said there was no basis in fact to a story which appeared in the Financial Times Aug. 28. Theres no transaction pending or even being discussed, he said.
Timber on minds of Louisiana police
BATON ROUGE, La. Louisiana State Police Retirement System heard informational presentations on timber investments from Molpus Woodlands Group and RMK Timberland Group at its Aug. 22 investment committee meeting, said Irwin Felps, executive director of the $450 million system. Fund officials are considering a 2% to 3% timber allocation, but no decisions will be made until the full boards Sept. 19 meeting.
The board is looking into timber because of its consistency and low correlation with the stock and bond markets, Mr. Felps said. Funding would most likely come from fixed income, but Mr. Felps declined to elaborate. If the board moves forward with the investment, UBS Prime Asset Consulting would likely conduct an invitation-only search.
Vanguard to take on 1st long/short fund
MALVERN, Pa. Vanguard Group is moving to adopt a long/short equity fund for institutional investors from Charles Schwab Investment Managements Laudus family of funds, said Vanguard spokeswoman Amy Chain. The proposal to reorganize the $21 million open-end Laudus Rosenberg U.S. Large/Mid Capitalization Long/Short Equity fund will be put before fund shareholders in early October and, pending approval, completed by the end of 2007.
The fund will continue to be subadvised by AXA Rosenberg Investment Management, which joined the advisory teams of the $12 billion Vanguard Explorer Fund and the $1.4 billion Vanguard U.S. Value Fund in June. The Vanguard Quantitative Equity Group will also manage a portion of the fund.
The fund, which will be Vanguards first long/short offering, is expected to appeal primarily to endowments and foundations, with a minimum initial investment of $250,000 for investor shares and $5 million for institutional shares. The funds expense ratio will be 0.75% for investor shares and 0.6% for institutional shares, well below the 1.97% ratio for funds in the long/short category tracked by Morningstar Inc., according to a Vanguard release.
Private equity firms buy share of KKR Financial
NEW YORK KKR Financial Holdings is selling $500.4 million, or 34 million common shares, to shareholders and private equity investors Morgan Stanley, Farallon Capital Management, Fir Tree Partners, JGE Capital Management, Marisco Capital Management, Oak Hill Advisors and Sageview Capital. KKR Financial, a publicly traded vehicle that was a REIT, is being sold for $14.40 per share. The private equity firms are buying 16 million shares; common shareholders are being offered rights to about 18 million shares in a bid to raise $270 million. KKR principals, who already own 12% of the company, will buy up to $100 million to strengthen KKR Financials balance sheet.