The hedge funds industry, and the trade body that represents it, need to do more to communicate the purpose and role of hedge funds in a financial world that was changed by the 2008 crisis.
“The hedge fund industry still doesn't have the best reputation outside of those that know it,” said Jack Inglis, CEO of the Alternative Investment Manager Association Ltd., in an exclusive interview with Pensions & Investments.
“We want to change that — we see it as part of our mission. We have a challenge from a communications perspective as an industry, with policymakers, regulators and end-investors, where we need to improve understanding and correct some myths.”
It has been a little more than a year since Mr. Inglis joined AIMA from Barclays Bank PLC, where he was a member of the global executive committee for prime services. His comments come as the hedge fund industry is facing some very public criticism and divestment from a number of investors.
“There are questions being asked of hedge funds around the value of their performance and the level of fees. At the same time, we have seen a few high-profile announcements from pension funds withdrawing from hedge funds,” Mr. Inglis said.
The latest high-profile announcement of withdrawal came in January, from the e161.7 billion ($183.6 billion) Dutch pension fund Pensioenfonds Zorg en Welzijn, Zeist, Netherlands. That followed a September 2014 decision by the $300.1 billion California Public Employees' Retirement System, Sacramento, to dump hedge funds.
PFZW officials said in their announcement that the fund had divested its $5 billion hedge funds portfolio over the past year, because it did not fit with its new investment policy. “All investment categories are assessed for their sustainability, complexity, costs and their contribution to PFZW's objective of index-linking pensions,” the announcement said. “For a long time, hedge funds were a useful tool in this regard, but lately, they have not made a sufficient contribution to this objective.”
CalPERS executives decided to close the retirement system's $4 billion hedge fund portfolio, part of an effort by internal investment staff to reduce complexity and costs of the portfolio, its announcement said.
Mr. Inglis declined to comment specifically on these pension funds and their decisions, but in a wider context he said it is important to look at the reasons behind such choices.
“It is important to address the questions that were raised. Where I think there is a disconnect largely at the moment is where certain commentators still feel that hedge funds should be super-high-octane performers in all environments. Perhaps, as an industry, we only have ourselves to blame for that,” he added.