“The fees often eat up any kind of return and returns haven’t been good,” said Parisian, a strategist with the American Federation of Teachers. “Most universities are getting a bad deal on their hedge fund investments. It’s nice to see smaller universities are reconsidering their allocations.”
To be sure, the endowment returns data is seven months old and the trends may shift in favor of hedge funds, which have been on the rebound with a stock rally following the presidential election.
Funds Rebound
The industry gained 1.2 percent last month, according to Hedge Fund Research Inc.’s Fund Weighted Composite Index, the best January since 2013. While hedge funds posted a 5.5 percent return in 2016, investor dissatisfaction prompted $70.1 billion in outflows, the most since 2009.
Still, a Feb. 6 survey conducted last month of 68 endowments and foundations by NEPC, a Boston-based consulting firm, showed that 30 percent of funds of all sizes planned to cut their hedge fund allocations this year, compared with 9 percent that expected to increase them.
Overall, allocations to hedge funds slipped to 9 percent as of Dec. 31 from 13 percent a year earlier, according to NEPC, which has more than $57 billion under management for endowments and foundations.
Endowments need to determine what role they want hedge funds to play in their portfolio, said Cathy Konicki, who oversees NEPC’s endowment and foundation practice and has a positive outlook on global macro hedge fund strategies.
“Maybe now’s not the time to take more money out of hedge funds, as the rest of the world is,” she said.
This article was provided by Bloomberg News.