Bucking Trend, NY Common Fund Goes Further into Hedge Funds


Avoiding funds of funds, the New York State Common Retirement Fund is increasing its allocation to hedge funds in hopes of excess returns.


(November 5, 2009) – The New York State Common Retirement Fund is bucking trends and plowing money into hedge funds while avoiding funds of funds.


The $116 billion fund, rocked by recent scandals over kickbacks and placement agents, plans to move upward of $1 billion into such alternative vehicles by the end of 2010. In 2008, most hedge fund indices were down almost 20%.


Currently, the fund has almost $3 billion invested with single-manager hedge funds, according to Crain’s New York Business. This move signals a further move away from hedge funds of funds, which, until 2008, captured about 80% of the Common Fund’s hedge fund allocation.


“We took a look at the portfolio, and realized there was major overlap and redundancies,” a spokesman for State Comptroller Thomas DiNapoli said. “We figured there were places where we could go direct to the hedge funds and eliminate the fee.” The spokesman cited fee reductions and eliminating investment overlap as two of the reasons for the continued move away from funds of funds. Notably, David Swenson—the Yale endowment chief and unofficial dean of endowment investing—has been quoted as calling funds of funds “a cancer on the institutional investment universe.”

To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>