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Hedge Funds Receive a Mixed Response from London Pension Funds – March 2013

by Graeme Terry

  • 04 Mar 2013
  • HF

In February 2012, Preqin reported on the increasing interest in hedge funds among London borough pension funds. However, the outlook on the asset class among these investors has been mixed over the past 12 months, with new investors being countered by redemptions from the space. At present, nine of the 32 London borough pension funds are active in hedge funds, with only one of the remaining 23 pensions indicating plans to actively consider the asset class in 2013.

London Borough of Camden Pension Fund made its first allocation to hedge funds in 2012 with a 5% allocation and quickly doubled this allocation. It now allocates 10% of its total assets to hedge funds through two funds managed by BlueCrest Capital and Brevan Howard Asset Management. London Borough of Waltham Forest Pension Fund also made its maiden allocation to hedge funds in 2012 with a 5% allocation to BlueCrest. BlueCrest is the most common hedge fund manager among London borough pension funds with five of the nine active investors including an allocation to a BlueCrest fund. Many of these pension funds invest in the BlueCrest AllBlue Fund which gives diversified exposure by investing in a portfolio of BlueCrest funds.

Despite these new inflows, other London borough pension funds have redeemed from the space altogether. London Borough of Hillingdon redeemed from hedge funds in 2012, having previously invested in the asset class through a fund of hedge funds managed by Fauchier Partners. Other pension funds that were previously considering making a first investment in hedge funds, such as the London Borough of Harrow Pension Fund, have decided against such investments.

The average hedge fund allocation among the active London borough pension funds is 8.7% and the majority are operating at their target allocation to the asset class. Investing via funds of funds remains the most common route for London borough pensions to gain exposure to hedge funds. London Borough of Enfield Pension Fund is the highest percentage allocator to hedge funds among this group, allocating 15% of its total assets under management to six hedge funds. The pension fund has no current plans for new hedge fund investments in 2013 but has not ruled out making an allocation if a suitable opportunity presents itself.

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