NSW Local Government Superannuation Scheme, Sydney, pulled its entire A$425 million (US$341 million) hedge funds-of-funds allocation and invested half of the redeemed capital in high-grade Australian credit, according to Investment & Technology newspaper.
The A$5.6 billion plan terminated hedge funds-of-funds managers BlackRock, Warrakirri and FRM Investment Management in recent months, disappointed by the funds’ degrees of correlation with listed markets.
About half of the money has been invested in a Macquarie Bank high-grade Australian credit portfolio.
“We went into that asset class thinking that hedge funds would be uncorrelated to sharemarkets. Not only the returns, but also the correlations, are not what they were promised to be,” said Peter Lambert, scheme CEO.
He said the fund of funds’ lack of transparency was another concern.
“This is not to say that we won’t return to that space in the future — but we wouldn’t go back to hedge FoFs,” Mr Lambert said.
Simon Mumme is a reporter with Investment & Technology in Sydney.
