The largest public pension fund in the U.S. is getting out of hedge funds. The California Public Employees’ Retirement System, known as CalPERS, said in a press release that the move was being made “to reduce complexity and costs in its investment program.” Specifically, it will unload 24 hedge funds and six funds-of-hedge-funds with a total value of about $4 billion.
“We are always examining the portfolio to ensure that we are efficiently and cost-effectively achieving our risk-adjusted return goals,” said Ted Eliopoulos, CalPERS’ interim chief investment officer, in the announcement. “Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at CalPERS’ size, the ARS program doesn’t merit a continued role.”
CalPERS has a stated annual return goal of 7.5 percent. It said in February that its board had adopted a new asset allocation mix that reduces risk but enables it to still achieve this return. It said it posted an 18.4 percent return during the 2013-14 fiscal year. CalPERS has averaged a 12.5 percent return for the past five years and 8.4 percent over the past 20 years. It did not disclose the performance of its hedge fund portfolio.
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The $8.5 billion BlueTrend managed futures fund, run by London-based BlueCrest Capital Management, posted a 5 percent gain in August. The computer-driven fund made money in four of its seven broad strategies, according to its most recent monthly report to investors. Gains came mostly from long positions in many different fixed income markets, with the fund cashing in on falling yields. It did especially well in developed markets, noting that benchmark yields dropped to new lows.
For example, the German 10-year yield fell below 1 percent, while the German two-year yield “turned negative for the first time since last May,” the letter stated. The fund, up 12.7 percent for the year, also did well in currencies as well as long positions in the stock market, which rose in August. On the other hand, it lost some money in each of the three major commodities sectors it trades. It was hurt by its long exposure to energy, especially gasoline and crude oil. The crops sector “was slightly negative” due, in part to short positions in wheat. Metals also lost a small amount of money, with the firm citing in the report “varied price movements across markets.”
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Tiger Global Management, which has been an aggressive public and private investor in Internet companies in China and India, disclosed that it has made two sizable investments in companies serving the Chinese auto industry. In a new regulatory filing, it disclosed it made an initial purchase of 6.565 million shares, or 14.9 percent, of Bitauto Holdings Limited, a provider of Internet content and marketing services for China’s auto industry. In a separate filing, the New York–based hedge fund and venture capital firm said it more than doubled its stake in Autohome to 6.735 million shares, or 18.5 percent of the company, which describes itself as an online destination for automobile consumers in China.
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Kenneth Griffin’s Citadel boosted its stake in Lennar to 9.37 million shares, or 5.4 percent of the total outstanding. At the end of the second quarter the Chicago-based hedge fund firm owned 3.62 million shares of the homebuilder, plus sizable positions in both call and put options on the stock.
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Another holding of bank activist Lawrence Seidman has agreed to be sold. Last week, Cape Bancorp, the holding company for Cape Bank, agreed to acquire Colonial Financial Services for either $14.50 per share in cash or 1.412 shares of Cape’s common stock. Seidman, the founder of Parsippany, New Jersey-based Seidman & Associates, in December filed a 13D announcing that he owned 5.57 percent of the shares of Colonial, a small Vineland, New Jersey-based bank holding company for Colonial Bank, FSB with nine locations. In 2011 Colonial agreed to appoint to its board John Bailey, a long-time Seidman associate who remains a director. Meanwhile, in late August, Seidman filed an initial 13D indicating that he owned 5.87 of Philadelphia-based Prudential Bancorp, the holding company for Prudential Savings Bank, which has seven locations. This was the third banking stock for which Seidman has filed an initial 13D in a four-month period.
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Marathon Asset Management has named Diego Gradowczyk a senior managing director and co-head of emerging markets. He will co-run the emerging markets group with partner and group co-lead Gabriel Szpigiel and be a member of the firm’s executive committee. He was previously head of emerging markets trading at Barclays. Marathon also said Andrew Szmulewicz, a former executive director at J.P. Morgan Chase in the Global Index Research Group, will join its emerging markets team. Marathon, founded in 1998 by Bruce Richards and Louis Hanover, currently has $12.5 billion in assets under management.
