The UK local authority most exposed to hedge fund strategies is Cheshire Pension Fund, which has approximately £545 million (€720 million) allocated to the asset class, Modern Investor’s analysis of Citywire's Global WOW (Who Owns What) database can reveal (this data is accurate to the end of June 2015).
In terms of the hedge fund exposures, Cheshire was followed by Wolverhampton (West Midlands Pension Fund, £323 million invested) Berkshire (£253 million), London PFA (£203 million), and Hampshire (£173 million).
However, taking into consideration the size of the scheme, the most exposed to the asset class is Berkshire Pension Fund, which has roughly 15% of its £1.7 billion (€2.25 billion) portfolio invested in hedge funds, followed by Cheshire, whose allocation to the asset class is around 13% of its total assets under management.
Among hedge funds which hold the most LGPS’ money, four made it to the top five of the list solely because of the support from Cheshire Pension Fund, including Permal – Jubilee Absolute Return Fund, Arrowgrass International Fund, Winton Futures Fund as well as Och Ziff Overseas II Fund.
Despite a trend showing that many institutional investors have recently turned to hedge funds in search for uncorrelated returns, the majority of UK local authorities remain unconvinced.
According to Citywire’s Global WOW data, which analyses the portfolios of 95 UK local authorities, of which 64 disclosed their hedge fund holdings over 2014/2015, a total of 26 authorities had some exposure to hedge funds whereas 38 steered clear of the asset class. All combined, LGPS invested £2.56 billion (€3.38 million) in hedge funds.
In terms of number of hedge funds invested in, Hampshire is the record-holder, with allocations spread between 24 hedge funds, followed by Lancashire (16) and Berkshire (15).
In the next Modern Investor’s data-driven investigation, we are going to examine more closely Cheshire’s exposure to hedge funds. This follows our previous data story, where we uncovered the top ten most loved private equity funds by LGPS.