Hedge fund returns of large U.S. public pension plans were strongly positive in the year ended June 30, but, on average, were lower than a year earlier.
Plus, fewer outperformed industry benchmarks.
The average return for the 12 months ended June 30 was 10.3% for the 13 hedge fund portfolios analyzed in Pensions & Investments' second annual review of large public plan hedge fund investors. By comparison, the average hedge fund return as of June 30, 2010, was 11% for the eight large public plan investors analyzed in P&I's first review (Sept. 20, 2010).
This year, four of the 13 hedge fund portfolios analyzed had better performance than the 11.5% return of the HFRI Fund Weighted index. That index tracks single and multistrategy hedge funds.
Last year, six of the eight funds reviewed outperformed the 9.1% one-year return of the HFRI Fund Weighted Composite index.
This year, 11 of the 13 hedge fund portfolios analyzed trounced the one-year 6.7% return of the HFRI Fund of Funds Composite index, which tracks hedge funds of funds. In the year ended June 30, 2010, all of the hedge fund portfolios reviewed outperformed the 4.7% return of the HFRI Fund of Funds composite index.
In both years, all of the public pension hedge fund portfolios easily surpassed their internal hedge fund benchmarks.
Hedge fund returns of the 13 plans for the year ended June 30, 2011, ranged from 5.9% to 18.8%. Policy benchmark returns ranged from 2.3% to 18.3%, averaging 6.1% for the group.
Last year, the average internal hedge fund benchmark return was 4.3% for the eight pension plans, whose policy benchmark returns ranged from 0.56% to 8% for the year. Actual hedge fund returns for the period ranged from 7.1% to 15.6%.