Why Calpers Decided to Divest $4B From Hedge Funds

The transcript discusses the challenges faced by pension funds, particularly CalPERS, in achieving desired returns amidst high fees and underperformance of hedge funds. It highlights the political and financial pressures on pension funds to negotiate fees and simplify portfolios. The discussion also covers the potential shift in investment strategies, with a focus on risk-adjusted returns and the role of hedge funds in providing diversification. The conversation suggests that CalPERS' actions may influence other funds to reconsider their investment allocations.

What is the primary reason pension funds are seeking higher returns?

• They are overfunded.

• They have low fixed income returns.

• They are following CalPERS' lead.

• They want to reduce complexity.

Why has CalPERS decided to question the fees associated with hedge funds?

• They want to increase their investment in hedge funds.

• They are paying high fees for relatively low returns.

• They are achieving higher returns than the S&P index.

• They have a large percentage of their portfolio in hedge funds.

What is one of the political pressures faced by pension funds?

• To simplify and reduce portfolio complexity.

• To increase investment in hedge funds.

• To increase the number of fund managers.

• To avoid investing in private equity.

What is a potential consequence of CalPERS' decision on other funds?

• They will increase their hedge fund investments.

• They will ignore CalPERS' actions.

• They will start questioning their own hedge fund allocations.

• They will reduce their equity market investments.

What challenge do hedge funds face as they grow larger?

• They become more innovative.

• They find it easier to generate alpha.

• They face difficulties in maintaining performance.

• They reduce their fees.

What is a dilemma faced by pension funds in the current market?

• Finding low-risk investments with high returns.

• Increasing their investment in private equity.

• Reducing their overall portfolio size.

• Avoiding all hedge fund investments.

What is the lifecycle stage of hedge funds when they are most attractive to investors?

• When they are young and innovative.

• When they have high fees.

• When they are large and well-known.

• When they are buying expensive assets.