Need for Talent Grows as Pensions Turn to Alternatives
Institutional investors around the world are increasingly turning to non-traditional investments. The Louisiana State Employees Retirement System recently committed $160 million to alternatives, reports Money Management Letter. Japan’s public pension fund, the world’s largest, is also sizing up alternative investments, according to Reuters. Moreover, a recent survey of investment practices at public pension plans has found an uptick in plans investing in alternative asset classes, with more than 50% of those polled investing in some sort of alternative investment product, according to FINAlternatives.
Executive search firm, A.E. Feldman, reports demand is on the rise for alternative investment professionals who have a comprehensive understanding of the risks and benefits of the various asset classes and investment strategies.
Pensions Committed to Alternatives
The Louisiana State Employees Retirement System recently committed $60 million to the Mesirow Financial Fund V - a domestic private equity fund. The Pension also injected $50 million each to the Erasmus Louisiana Growth Fund II - a specialized co-investment vehicle run by alternative investment house Aldus Equity). And the fund has committed $50 million to the Bridgewater Associates Pure Alpha Fund - a multi-strategy hedge fund – after allocating $100 million in 2007.
Japan’s public pension fund is currently considering alternative investments, according to Reuters. The report quotes Takahiro Kawase, President of the Government Pension Investment Fund, as saying, “We may consider alternative investments based on whether our risk-return improves by expanding investments to various products, and not because we need such investments when we raise our performance target.”
Moreover, a recent survey finds that public pensions love alternatives, according to FINAlternatives. The joint study conducted by the Bear Stearns Pension, Endowment and Foundation Services Group and the Government Finance Officers Association, polled roughly 150 public pension plans. More than half, 52%, of respondents say they invest or plan to investment in alternative asset classes, including real estate, private equity, venture capital and hedge funds.
“Our survey found that public pension plans are using very sophisticated and broad investment strategies to manage their assets,” said Francie Heller, Head of the Bear Stearns Pension, Endowment and Foundation Services Group. “The results reveal that investing in alternative assets classes has grown in popularity as an increasing number of public pension plans alter their investment policies and more states pass legislation allowing alternative investments.”
Of the plans surveyed, 35%, invest directly in hedge funds with multi-strategy, equity long/short and market neutral identified as the three most preferred types of hedge fund strategies. More than half, 53%, say they invest in fund of funds.
Hedge Fund Assets Growing
Institutional investors remain strongly committed to hedge funds, despite last year’s downturn in performance, according to a separate study by Greenwich Associates and Global Custodian. Looking ahead, Greenwich Associates says 23% of U.S. institutions plan to increase their allocations to hedge funds beyond current levels by 2010. A separate KPMG survey also contends that pension funds are expected to double their allocations to hedge funds to an average of 8% from 4% within three years – despite market volatility, according to Reuters.
Mitch Feldman, President of A.E. Feldman, says hedge funds need people to manage the trillion-dollar industry. He adds that emphasis on risk management jobs is building. Continued growth of assets under management at hedge funds is also opening doors for back- and middle-office staff. Opportunities exist in hedge fund accounting and administration as well as investment operations.
