Published on February 20, 2014
Who Invests In Hedge Funds In My State? Managed Funds Association | February 2014
Overview Millions of people across America benefit from hedge fund investments in ways they may not immediately recognize. These benefits come in the form of retirement security provided by a pension plan, scholarships provided by universities that invest with hedge funds and local economic development or educational programs funded by charitable groups that invest. This presentation is designed to provide a brief overview of the ways that hedge fund investments provide real, meaningful benefits for millions of individuals and families across the U.S., with real examples from states across the nation. Hedge Fund Investor Map: To learn about hedge fund investing in your state, visit or download the Managed Funds Association’s Hedge Fund Investor Map. 2
1 Who invests in hedge funds? Hedge funds originated as an investment vehicle to help diversify portfolios, manage risk, and produce reliable returns over time. While hedge funds’ investor base has evolved though the years – from individuals to institutions such as pension plans, universities, and foundations – their core goals have not. Simply put, hedge funds are a tool that helps millions of people meet their financial goals and obligations. Hedge funds’ investor base has evolved significantly over the years, with 66% of assets under management currently coming from institutional investors such as pension funds, university and nonprofit endowments.* This partnership is strong and growing. In 2013, 84% of investors said hedge fund performance met or exceeded their expectations.* FACT: 66% of hedge fund assets are held by institutional investors. *Source: 2014 Preqin Global Hedge Fund Report. 3
2 Hedge Funds and Pensions: Strengthening Retirement Security Public and state employee pension plans offer retirement security for millions of workers, retirees, and their families. They have increasingly partnered with hedge funds to help diversify their investments and help to provide economic security to beneficiaries. In fact, public pension funds represent the largest proportion of capital invested in hedge funds by institutional investors at over 22%.* Examples of public pension plans investing in hedge funds include: Many of the largest employers in the U.S. also view hedge funds as an essential tool in their investment toolbox to help provide reliable, riskadjusted returns that enable their plans to pay the retirement benefits to millions of Americans. Examples of Corporate Pension plans investing in hedge funds include: *Source: 2014 Preqin Global Hedge Fund Report. 4
Case Study: 3 How Californians Benefit from Hedge Funds Across the state of California, hedge funds are helping people attain retirement security, expand access to quality higher-education and improve the quality of life in communities through important work done by non-profits and charities. For Example: California Public Employees Retirement System (CalPERS) manages retirement benefits for 1.6 million Californians. The plan covers state employees, school employees, and local public agency employees. In 2012, CalPERS invested $5.2 billion of its $236.9 billion total assets in absolute return strategies which include hedge funds. The University of California system has 10 campuses and a total membership of more than 184,000 members. In 2012, the University of California system invested $3 billion in absolute return products. The University’s investments total more than $42 billion. The James Irvine Foundation has funded more than $1 billion in grants to over 3,500 nonprofit organizations across California, with focusing on educational opportunities for California youth, economic development projects, and career training initiatives for low- income students. In 2011, the Irvine Foundation managed a $1.6 billion portfolio and invested over $313 million, or 20%, in absolute return hedge funds. For more information on how hedge fund investments benefit millions across California, click here. Not from California? Find out how hedge fund investments benefit residents in your state here. 5
4 University and College Endowments Invest in Hedge Funds University and college endowments were among the first institutions to partner with hedge funds in the early 1990’s, and this relationship has strengthened in recent years. Hedge fund investments help universities grow assets to provide funding for: scholarships, athletics, research, salaries for professors and other resources critical to their mission. Chances are, if you have a son or daughter attending college on a scholarship, they are likely benefitting from hedge fund investments. Endowments investing in hedge funds include: 6
5 Case Study: How Kansans Benefits from Hedge Funds Kansas Public Employees Retirement System (KPERS) oversees three defined-benefit plans for state and local public employees and its membership totals more than 281,000 active, inactive and retired members. According to its 2012 annual financial report, KPERS has more than $16.3 billion in total assets. Of that $16.3 billion, KPERS placed more than $387 million into an alternative investment portfolio that included hedge funds. The University of Kansas’ endowment invested more than $424 million, or about 29%, of its total endowment into an alternative investment portfolio that includes hedge funds in 2012. Boeing employs 1,891 Kansans, and nearly 12,000 Boeing retirees live in Kansas. According to its most recent financial report in 2012, Boeing invested $2.5 billion in hedge funds, roughly 5% of the company’s defined benefit plan, which totals $50 billion. For more information on how hedge fund investments benefit millions across Kansas, click here. Not from Kansas? Find out how hedge fund investments benefit residents in your state here. 7
6 Foundations and Non-Profits Invest in Hedge Funds Non-profit foundations and charitable organizations around the world partner with hedge funds to help establish the financial resources needed to fund critical projects in local communities. Here are examples of types of foundations at work across America that partner with hedge funds: 8
7 Hedge Fund Investor Map If you’re interested in learning more about the real, meaningful ways that residents in your state benefit from institutions partnering with hedge funds, visit or download the Managed Funds Association’s Hedge Fund Investor Map. Download the app for iPad here View the map on a web browser here 9
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