Managers bowing more to needs of institutional clients
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      Daniel McHugh
      Aviva Investors promotes from within for real assets CIO
      Marc Rowan
      More alts managers seek expansion to retail market
      Mellody Hobson, president of Ariel Investments, speaks during an interview in Hong Kong on Sept. 1, 2017
      Ariel launches effort to boost minority business owners
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • Mitchells & Butlers turns off tap on pension contributions until April
      Jerome Powell, chairman of the Federal Reserve, adjusts his glasses during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington on Sept 24, 2020.
      Powell says Fed will hold steady during economic recovery
      Institutional investors mobilize for equitable global COVID-19 response
      Few participants tapped savings to weather pandemic – Vanguard
    • DC plan sponsors differ on need for annuities – survey
      Biden’s retirement idea getting the cold shoulder
      Few participants tapped savings to weather pandemic – Vanguard
      pie chart with calculator
      Fidelity: Savers added big to retirement accounts in Q4
    • After strong 2020, ESG investments forecast to grow more – Moody's
      Emissions rise from the coal fired power plant in South Carolina
      U.K. managers seen pressuring firms on diversity, climate change
      Asset management industry remains vastly white, male – survey
      Institutional investors mobilize for equitable global COVID-19 response
    • Spirit winners
      Prudential honors young people who are helping out
      2 U.K. pension execs take on ESG investing in new podcast
      Donation illustration
      Jefferies will use trading commissions to do good
      Michael Arougheti
      SPACs ride wave as latest investment darling
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • MassPRIM sets $450 million for 3 alts funds
      New Mexico allocates $105 million to 3 alts funds
      Boston Retirement tees up $45 million for 2 private market fund of funds
      Border to Coast picks 5 managers for infrastructure, makes first co-investment
    • Brightwood Capital adds senior investment professional
      Kimberley Stafford and Alec Kersman
      PIMCO names product strategy group head
      Praesidium chooses director of client service, business development
      York Capital appoints new managing director
    • New Hampshire taps New Mexico fund chief as new executive director
      IBM to input $300 million into international pension plans
      Arconic transfers $240 million in pension liabilities
      S. Korea’s National Pension Service gains almost 10% in 2020
    • Brightwood Capital adds senior investment professional
      New Hampshire taps New Mexico fund chief as new executive director
      Kimberley Stafford and Alec Kersman
      PIMCO names product strategy group head
      Praesidium chooses director of client service, business development
    • Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
      Kohlberg closes latest private equity fund at $3.4 billion
    • Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
      EQT inks deal to buy real estate manager
    • Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      David Ireland
      Sponsors returning to questions about in-plan annuities
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
    • Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
      Outlook 2021
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • MassPRIM sets $450 million for 3 alts funds
      New Mexico allocates $105 million to 3 alts funds
      Boston Retirement tees up $45 million for 2 private market fund of funds
      Border to Coast picks 5 managers for infrastructure, makes first co-investment
    • MassPRIM sets $450 million for 3 alts funds
      New Mexico allocates $105 million to 3 alts funds
      Boston Retirement tees up $45 million for 2 private market fund of funds
      Border to Coast picks 5 managers for infrastructure, makes first co-investment
    • Emerging Market Equity Manager Services
      Securitized Credit Manager Search
      Private Placements Asset Manager Search
      Actuarial Consultant Search
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Shifting DC Times – Winter 2021
      Bond ETFs show maturity during Covid market mayhem
      Pension Consolidation: Optimizing Scale and Maximizing Efficiency
      China is embarking on a new stage of growth
    • Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
      Bill Peressini
      Commentary: Carbon’s elemental role in the future of impact investing
      Teresa Ghilarducci
      Commentary: Lower rates for longer mean a drastic rethink on funding
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
      watch video
      1:33
      A look at hiring activity in 2020
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for February 2021
      Top Performing Managers of Convertibles, 4th Quarter 2020
      Top Performing Managers of Domestic Growth Equity, 4th Quarter 2020
      Top Performing Managers of Domestic Limited-Duration Fixed Income, 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. SPECIAL REPORT: HEDGE FUNDS
September 18, 2017 01:00 AM

Managers bowing more to needs of institutional clients

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    James H Schriebl
    David Warren said his firm is doing more customization, and the process really is not very difficult.

    Hedge fund managers are more willing to cater to the needs of institutional investors given a tough fundraising environment.

    Managers are responding to asset owners' requests for new or customized versions of flagship hedge funds that more precisely meet their portfolio construction needs.

    Credit specialist DW Partners LP, New York, for example, now runs several customized versions of the firm's flagship Credit Catalysts strategy at the request of existing clients because the narrower versions better fit their requirements, said David Warren, founder and chief investment officer.

    Mr. Warren said the process of creating a custom portfolio isn't difficult but the question is "how you can tap the appropriate level of infrastructure at the right price."

    Mr. Warren declined to identify the investors using managed accounts for bespoke strategies.

    DW Partners managed $3.1 billion in various credit strategies as of June 30 and ranks 73rd in Pensions & Investments' annual hedge fund survey (see list below).

    Industrywide, both established and emerging hedge fund firms are following a similar path, said attorney Peter Greene, a partner and vice chairman of the investment management practice of Lowenstein Sandler LLP, New York.

    Mr. Greene said hedge fund managers are obliging institutional appetite for non-standard investment arrangements in two main areas.

    Large hedge fund managers, for example, are receiving a high volume of requests from pension funds and other institutional investors to set up special investment vehicles (aka separate accounts). SIVs allow investors to "curate their own portfolios by picking just the strategies they want," Mr. Greene said.

    He noted that from a business perspective, SIVs tend not to require more investment personnel because the manager makes block trades then allocates assets to each portfolio, but they do often necessitate additional administrative staff.

    As for minimum account sizes, Mr. Greene said: "While it depends on the manager — AUM, established or startup — and the circumstances — how favorable the terms are to the manager or whether there is a pre-existing relationship between the institutional investor and the manager — a fair range is $50 million to $100 million."

    Another point of accommodation by new hedge fund firms, especially those being launched by "well-pedigreed managers" is at startup, Mr. Greene said, when large allocations from one or two "day one" institutional investors are welcomed. Unlike founder's shares, which offer good terms for early investors, day one investors share in the profitability of the firm as it grows in exchange for a substantial investment, generally between $150 million and $200 million, Mr. Greene said.

    "These new hedge fund managers are willing to accept one or two of these day one managed accounts" because they need the jump-start of a few hundred million dollars at the outset but not more, Mr. Greene stressed.

    New strategies

    Other hedge fund managers have responded to requests for investment solutions from institutions by launching new strategies.

    For example, in March, Bridgewater Associates LP, Westport, Conn., introduced a new family of funds featuring ready-made combinations of alpha and market betas.

    The new funds employ Bridgewater's long-running Pure Alpha hedge fund strategy as an overlay on passively managed investments within a commingled fund.

    The firm's clients frequently overlay Pure Alpha on beta-driven stock and bond strategies to reduce risk and add diversification. The single-fund format simplifies and streamlines the operational process for investors.

    The new funds are available only to existing clients, who may shift money from other Bridgewater strategies into the new funds.

    Bridgewater is the largest hedge fund in P&I's rankings with $123 billion managed in hedge funds as of June 30.

    Hedge funds-of-funds managers also are leaning on hedge fund managers to be receptive to investors' needs.

    "Ever since the crash but much more so recently, there's been a really good shift in client focus by hedge fund managers Now, it's a lot more about the client's interests and less about the manager," said Tracy McHale Stuart, CEO, Corbin Capital Partners LP, New York.

    "The hedge fund industry really is bifurcating into hedge funds that will work outside of standard structures and find a way to meet the request and those that will not," she added.

    Corbin has significantly increased its ability to oblige investors with customized approaches such as setting up an opportunistic credit hedge fund-of-funds strategy in a commingled fund for a Taft-Hartley pension funds that fits the needs of multiemployer plans.

    The fund was launched in July 2016 and has attracted roughly $700 million.

    Corbin ranked 22nd in P&I's survey of hedge funds-of-funds managers with $4.8 billion under management as of June 30.

    Customized strategy

    Corbin crafted a customized strategy for one of its Taft-Hartley plan clients, the $3.5 billion New York State Nurses Association Pension Plan and Benefits Fund, Albany.

    The plan originally invested in Corbin's flagship commingled fund, Pinehurst, in 2009, but the multistrategy fund "didn't fit us well. The fund meets the liquidity needs of most funds but because our plan is fully funded, we can lock up capital for a little longer and target specific risk premiums such as an illiquidity premium. For us, one size did not fit all," said Case W. Fell, chief investment officer of the pension plan.

    Investment staff asked Corbin to set up a separate account and gave the manager full investment discretion to increase the duration and maximize the efficiency of the $231 million allocation. Corbin can invest in its own commingled strategies, directly in hedge funds and in co-investments with hedge fund managers.

    Mr. Fell said the target return for the separate account was set to be 100 basis points higher than that of the Pinehurst fund, or the return of U.S. Treasury bonds plus 8 percentage points with expected volatility of less than 6% over a full market cycle.

    The separate account was launched on Oct. 31, 2015, and has met expectations, Mr. Fell said, noting the preliminary year-to-date return of the Corbin strategy as of June 30 was 4.4% with 3.4% volatility.

    Related Articles
    Bridgewater prepares Chinese version of All Weather risk-parity strategy
    Bridgewater's Dalio talks life, work in new book
    Gainers finally outpacing losers
    Gainers finally outpacing losers
    Blueprint Capital gains traction with niche credit platform
    Bridgewater shifting to partnership structure, expanding equity holders
    Recommended for You
    Raucous year sees hedge fund assets decline 3.1%
    Raucous year sees hedge fund assets decline 3.1%
    How the survey was conducted
    How the survey was conducted
    Hedge funds wanted after investors lose complacency
    Hedge funds wanted after investors lose complacency
    Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    Sponsored Content: Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Shifting DC Times - Winter 2021
    Bond ETFs show maturity during Covid market mayhem
    Pension Consolidation: Optimizing Scale and Maximizing Efficiency
    China is embarking on a new stage of growth
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    Gold Outlook 2021
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center