The University of Sydney endowment will invest directly in hedge funds for the first time, after its investment team identified some sufficiently skilled managers with newfound capacity.
The endowment will invest up to 3% of its A$700 million (US$634.9 million) long-term fund in hedge funds, and target single-manager, multistrategy products, said Greg Fernance, head of investment and capital management.
Even though the strategic asset allocation for the long-term fund, which is made up of gifts and bequests, allows for 3% of its capital to be invested in hedge funds, the fund has not yet exercised this provision — mainly because the managers that staff liked had reached full capacity.
But after honoring investor redemptions during the financial crisis, and observing that many Australian institutional investors had weathered the financial crisis well and were a solid source of capital, such managers are seeking new commitments.
“Some of the hedge funds we've seen recently were endowment friendly. In other words, they had capital preservation as a strong theme within their approach,” Mr. Fernance said.
The fund would invest directly with these managers to avoid the additional layer of fees accompanying fund-of-fund structures, he said.
Asset consultant Mercer is providing research about identified managers.
Simon Mumme is a reporter with Investment magazine, Sydney.