LONDON (Reuters) - The UK’s West Midlands Pension Fund is in the process of withdrawing its hedge fund allocations of just over 200 million pounds ($300 million), becoming the latest institution to end the use of these relatively expensive and complex products.
The local government pension scheme fund, which manages more than 10 billion pounds ($15 billion), gave no reason for the move.
The near $3 trillion global hedge fund industry has seen large pension funds such as the California Public Employees’ Retirement System and the PFZW in the Netherlands pull out in the last year, citing high costs, complexity and poor performance.
“The funds are to be allocated to other asset classes in which the Fund invests, especially those areas where we are under-allocated,” the West Midlands fund told Reuters in an e-mail.
Its hedge fund allocations included BlueTrend Fund Ltd, Capula Global Relative Value Fund, Taconic Opportunity Offshore Fund and Davidson Kempner International at the end of March 2013, according to a document on the pension fund’s website.
The decision comes after yet another year of poor returns in hedge funds, which gained about 4 percent in 2014, half the returns generated in 2013, data from Eurekahedge showed.
Over the last 10 years, however, hedge funds earned $1.5 trillion for their investors, the Alternative Investment Management Association said last week. [ID:nL4N0V64X6]
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Editing by Carolyn Cohn, Greg Mahlich