Fee negotiations are hard. Term negotiations are hard. Separate account naming decisions should not be. If the California Public Employees’ Retirement System (CalPERS) records are any indication, they are much more creative—but they can also be just as problematic.
“The Asian funds-of-hedge-funds program, launched in 2005/2006, was called ‘Blue Diamond,’” one CalPERS insider recently told me, reminiscing over how the Californian giant had named its first hedge fund separate accounts. I had been digging through the fund’s financial statements in reaction to its momentous (to some) decision to abandon its Absolute Return Strategies portfolio, and was attempting to determine which hedge funds would be the biggest losers. The names I found buried within their 2013 “CIO Performance Report” were slightly odd. Ermitage Highbury? PAAMCO 1848? OZ Eureka? I had never heard of them.
There was a reason: They were all, as the insider pointed out, bespoke names with quirky references. “‘Blue Diamond’ is a play on the CalPERS logo, which is a blue triangle but has a starbust-y thing that could be seen as light going through a diamond,” he explained. (Another California public fund CIO claimed that his fund “spent literally two hours arguing over what to name a separate account. It’s funny—but that’s two hours we’ll never get back.”)
“European funds-of-hedge-funds, launched in 2006, were called ‘Highbury,’” he continued. “Somebody on the CalPERS team was a huge Arsenal fan. Emerging manager funds-of-hedge-funds, launched 2006/2007, were labeled ‘1848.’ That was the year gold was discovered in California.” Finally, “Eureka”: “Customized, direct hedge funds or funds-of-one, launched 2009, were ‘Eureka.’ That’s the California state motto.” In Greek, it means “I’ve found it.” It is also the name of the coastal city into which men and resources rushed to support California’s literal gold diggers.
Being gold rush references, “Eureka” and “1848” are double-edged swords for the politically sensitive pension plan—was it CalPERS, or hedge funds, that reaped California’s gold?