Pensions Plans And Hedge Funds – PIMCO Is The Biggest Winner

By Hedge Fund Insight staff

Endowments and Foundations are the longest standing institutional class of investors in hedge funds. The thought-leaders amongst them got involved in the late 80’s. Sovereign Wealth Funds have become significant investors in large hedge funds in the last 10 years through the large tickets they write. But both these types of institutional investor have less capital committed to hedge funds in aggregate than pension funds. So it is interesting to see what the Towers Watson Global Alternative Survey 2014* shows about pension funds and their exposure to hedge fund management groups, both single manager and multi-manager, beginning with the former.

Amongst the largest hedge fund management groups in the Survey half the total assets under management have been contributed by pension plans. But to make up this average across the 12 single manager hedge fund groups in the TOP 100 Alternative Investment firms there are firms with a lower and higher contribution from Pension assets. The firms in Table 1 are the outliers.

source: Towers Watson/Hedge Fund Insight

BlueCrest gets 37% of its assets from pension plans, but some of those that remain are under review. As it is, from the end of 2012 to the end of 2013 the absolute amount of pension plan assets managed by BlueCrest fell by 8%, roughly the same amount as firmwide assets fell over the period. Winton has experienced something similar over the period.

The very large hedge fund management firm that did best in terms of attracting new assets from pensions last year was PIMCO. Assets from pensions managed by the firm went up 82% last year to $11.3bn. Other single manager firms that did well in getting new allocations from pension plans were Nephila Capital, Brevan Howard and Blackrock.

The percentage of pension plan assets managed by the largest single hedge fund groups went up last year. By the end of 2013 13% of pension plan assets were overseen by large single manager hedge fund groups, up from 11% a year earlier.

Funds of Hedge Funds

There are ten funds of hedge fund groups amongst the TOP 100 Alternative Investment firms in the Survey. The largest funds of funds groups get even more of their assets from pension plans than the largest single managers do (59% on average vs 50%). Table 2. shows the top and bottom-end of the ranking of assets contributed by pension plans for the very largest funds or funds (10 in the Survey).

source: Towers Watson/Hedge Fund Insight

While 5 of the largest 10 funds of funds grew there assets from pension plans last year, the firms which grew the most from that source of capital were The Rock Creek Group (up 20%), Blackstone (up 14%) and Grosvenor Capital Management (up 10%). Both Permal and Man Group had less assets from pension plans in aggregate at the end of 2013 than at the start of that year. Four of the 10 largest funds of funds managers had less total assets under management (from all types of investors) at the end of 2013 than they had at the start.

*Please note that the survey has a data reference date of 31/12/13.