Hedge funds suffered more than just financial damage in the carnage of last year – although a near 40% decline in assets across the industry was disastrous. Scandals in the mainstream press, combined with broken performance promises, meant that the reputational impact on these funds was equally devastating.
This fall from grace came amid a growing trend towards diversification by pension funds. In the US, around 40% of public pension vehicles now invest in hedge funds, more than doubling from 13% in 2005. Use of hedge funds in the UK pensions market has lagged behind other developed countries, with trustee conservatism and lack of knowledge cited as the main barriers. Figures from the National Association of Pension Funds showed that UK schemes had an average of 1.9% invested in hedge funds last year. So, have UK pension funds been put off before they have had a chance to appreciate the strategy?
In performance terms, hedge funds are benefiting from the post-March rally in markets and enjoyed their best single month since 2000 before stalling in June alongside with most other asset classes.
