A massive pension system said no to hedge funds. The $298 billion California Public Employees’ Retirement System (Calpers) is quitting hedge funds, saying they’re too expensive and complex for its investment portfolio
Hedge funds have amassed a record $2.8 trillion in assets as institutional investors pour money into alternative investments. McKinsey & Co. said last month that assets in alternatives, which also include real estate and private equity, may reach $14.7 trillion by 2020, double the current level.
Unlike traditional money managers, hedge funds can bet on rising as well as falling prices of securities, aiming to make money in any market environment. They generally charge fees of 2% of assets and 20% of returns, a level of remuneration that some institutions have balked at.