Riddle me this.
US pension funds are NOTORIOUSLY conservative investors, and I would know. I’ve done many hedge fund pitches over the years to everyone from family offices to HNWs to pension fund advisors, and let me tell you, the last group can be rough. They typically want 3-year track records, a BARE minimum of $200M (and more likely $2B+) AUM, and pedigreed fund managers who’ve come off institutional desks from Goldman and the like. So if you don’t fit one (or all) of those categories, good luck getting funding even though, tragically, many huge pension funds (such as those in my home state Illinois) are massively underperforming and emerging managers often far exceed more traditional managers on ROI.
SO…back to our riddle….why are the NYC firemen and police pensions co-investing in an exotic British-based quant fund who also has….gasp(!)….crypto holdings as well? Three words – “they’re chasing returns”. Let’s see if this trend holds for other pension funds moving forward as well. Our incredible first responders take massive risks for our communities every day. A little risk in their pension portfolios surely can’t be a bad thing.
“Fighting fires. Upholding the law. Investing in a quant fund loaded up with some of the most exotic and volatile derivatives trades on Wall Street.
It’s all in a day’s work for New York’s finest.
The pension funds for New York City’s police and fire departments last month allocated a combined $134 million to London-based Florin Court Capital. At first blush, it’s an odd pairing: the quant shop follows trends in hard-to-trade assets from European power to cryptocurrencies.
This would be an exotic trading strategy at the best of times for even advanced investors like the storied pension institutions of New York City. Right now, it stands out because frenzied markets have battered the average returns posted by trend-following quants, also known as commodity trading advisers.
Yet the appeal of momentum-trading strategies — most of which trade liquid instruments like bond and stock futures — endures because investors are on the hunt for what some in the industry call “crisis alpha,” or funds that will outperform when markets crash. It’s reinvigorated appetite for CTAs, which returned a profit each time equities fell at least 15 percent between 1985 and 2016, according to a study by Man Group…”