Hedge funds are finding out it’s hard to be all things to all people, as they have been reducing their risk exposure in an attempt to appeal to conservative pension plans, yet disappointing other investors looking for astronomical returns, BusinessWeek reports.
Some finance experts are now saying that hedge funds are becoming too institutional and bureaucratic. “You have to take risks to produce market-beating returns. That’s what we pay people to do,” said Robert Discolo, head of hedge fund strategy at AIG Global Investment Group, where he runs a hedge fund-of-funds that invests in outside managers. “But a lot of managers are notching it down. I’m not happy about it.”
And Russell Read, chief investment officer of the California Public Employees’ Retirement System, said hedge funds that have average risk are “inherently unsatisfying.”
As proof of hedge funds’ diminishing returns, they returned an average of 12.9% last year, versus the S&P 500 Index’s 13.5% increase.
Hedge funds aren’t the only investment vehicles becoming more cautious. Private equity firms are also building larger management teams, complete with such administrative functions as human resources, public relations and compliance.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.