Calpers, the California Public Employees' Retirement System, which manages over $190 billion in assets for California's state employees, is also one of the largest and most influential investor in hedge funds and fund of hedge funds. Calpers is demanding new terms from hedge funds it invests in amid poor performance and limited transparency.
While just a few years ago, investors were fighting each other to get a chance to place their money with high-flying hedge fund managers (3% and 30% instead of 2% and 20%), now powerful investors are gaining leverage over funds and asking for better terms.
Among the new terms Calpers is asking for from hedge funds are "clawbacks" on fees if performance weakens and lower prices. Calpers does business with 26 hedge funds and nine fund of hedge funds. However, Calpers is not asking all funds to follow the same restrictions.
One of the more interesting proposals / demands from Calpers is the possibility of setting up separately managed accounts. Calpers assets would be segregated from other client assets at hedge funds the retirement fund does business with. This would prevent Calpers from facing the same withdrawal and redemption restrictions faced by many hedge fund investors. What implications will this move have for other institutional investors who are growing impatient with lengthy redemption periods amid the recent poor performance?
Here are some of the hedge funds utilized by Calpers: The Rock Creek Group, 47 Degrees North Capital Management, PAAMCO, Ermitage Group, Europanel Research and Alternative Asset Management (ERAAM), Vision Investment Management, SPARX Group, and Mosaic Investment Advisors.