Yes, hedge fund managers, there really is a Santa Claus.
Even though their performance has been bad this year, there’s no coal in their stockings. Indeed, pension fund investors might give them even more money in 2016.
US pension funds are planning to “maintain or increase” their commitments to hedges next year, according to Preqin, an industry research firm.
Pensions are now allocating about 9 percent of their portfolios to hedge funds, up from around 7.4 percent in 2011, Preqin’s survey shows.
“Public pension funds have actually increased their allocations to hedge funds, a trend we’ve observed over the past five years,” Preqin’s Jesse Fahy told The Post.
Some 278 US pension funds invest in hedge funds — 50 more than in 2011, Preqin said.
More money is likely to flow into hedge funds next year because both interest rates and uncertainty are rising, making hedge funds more attractive, pension fund investors said.
That could happen even though hedges haven’t outperformed the broader stock market since the crash of 2008. Through November, US hedge funds are up 0.61 percent, according to Absolute Return, compared with a 3 percent gain for the Standard & Poor’s 500.
A year ago, CalPERS, the California Public Employees’ Retirement System, took the bold move of exiting the asset class altogether. While a few European pensions have done the same, no other US funds have followed in CalPERS’ footsteps.
“That trend hasn’t caught on,” said Farouki Majeed, the chief investment officer of the $12.5 billion Ohio School Employees Retirement System.
Still, with several prominent hedge funds posting double-digit losses this year and politicians talking about raising taxes on the billionaire moneymakers, he sees “headline risk” in sticking with hedge funds.
Ohio is the only one of 16 top pension fund investors in hedge funds contacted by The Post that said it had cut back its investments to them. The pension plan transitioned from having no hedge funds before the crash to having a 15 percent allocation by 2013. But with returns lower than expected, Ohio scaled that back to the current 10 percent, Majeed said.
“I’m not a great fan of the hedge fund industry,” Majeed said, noting that Ohio had cut the number of hedge funds in its portfolio in half.
Like most pension investors, he is looking at hedge funds not for killer returns but rather to help stabilize the rest of the portfolio. Ohio’s hedge funds have outperformed fixed income over a five-year time horizon, which is what the pension fund now measures them against. As of October, its hedge funds earned 4.5 percent over the past five years, compared with 3.9 percent for fixed income.
Other pension funds said they aren’t reducing their hedge fund investments. The Pennsylvania Public School Employees’ Retirement System, which has 10 percent of its fund invested in hedge funds, said it has “no plans” to change that allocation.
The program “is not designed to mimic the equity market,” said its chief investment officer.