| CalPERS' CIO expects smart money to move into alternatives and structured products |
|
|
| 18/02/2007 | |
|
More than 150 institutional investors were polled during a pension fund conference in Geneva on the future flow of smart money. Among the panellists who interpreted the results was Russell Read, CIO of CalPERS, who underscored the growth of alternative investments. His presence on the panel was not coincidental. The head of the $224bn California pension fund, the biggest in the US, plans to take private equity stakes in infrastructure projects while selling short commodity futures to hedge its exposure (bfinance 27/11/2006). "Along with private equity and real estate, there will likely be new opportunities in the Asian markets," said Read. "I think the poll results reflect the dynamism of change in alternative and structured products." The comments were made February 8 during the IFM Institutional Fund Management Conference in Switzerland. Of those polled, 37.7% of respondents believe alternatives will see the greatest product innovation, followed by structured products (34.4%). Beta strategies received the lowest ranking, garnering just 13.1% of the votes and trailing DC institutional (14.8%). Most respondents expect tomorrow's smart money to go into portable alpha strategies (36%), followed by infrastructure funds (33.3%), real estate (19.7%) and finally currency overlay (10.6%). "There is a massive capital need for infrastructure worldwide, yet many of the investors in infrastructure are starting to look unattractive from a financial standpoint," said Read. He believes a valuation sea change is taking place in favour of commodities and as a result technology companies may not command the same historical valuations. That may explain in part why more pension funds may be warming up to energy. According to the National Association of State Investment Officers (NASIO), few pension funds invested in commodities in 2005. One year later, more than a third either had or planned to. The heightened interest in alternatives is part of a broader trend in search of diversification and out performance. According to Michael O'Brien, Managing Director at Barclays Global Investors, Anglo Saxon pension funds are moving away from equities. "You are seeing diversification, which is what's driving the move into alternatives." While O'Brien is seeing a drop in volume in currency overlay strategies, which he attributes to capacity constraints and the narrowing of arbitrage opportunities, portable alpha strategies are on the rise. "Increasingly, investors are separating alpha from beta whereas the two were historically bundled. They are realising that the two offer distinct returns." VB |
|
Articles of the same Topic : CalPERS
|
|
© Copyright 2008 bfinance. This document is for your personal non-commercial use. Any further copying, reproduction, distribution is strictly prohibited. To obtain permission please contact This e-mail address is being protected from spam bots, you need JavaScript enabled to view it