Experiences with investing in Hedge Funds

​PGGM no longer invests in hedge funds on behalf of PFZW. Ruulke Bagijn looks back at eleven years of investing in this specific asset category.

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​PGGM has closed the PGGM Fund of Hedge Funds. This is a result of the decision in 2014 of PFZW, PGGM’s main client, to discontinue the allocation to hedge funds.

The hedge fund investments have, over the years, delivered a performance conform expectations and contributed to diversification of the portfolio of PFZW. Looking forward, however, PFZW has a less strong belief on the positive contribution of hedge funds as the asset category provides a less predictable and more diffuse stream of returns (combined alpha and beta). PFZW has also considered that investments in hedge funds fit less with its new investment policy 2020, which has an even stronger focus on positive sustainable development.

PGGM will continue to offer hedge fund investments via its external manager service if clients demand this.

The liquidation of the PGGM FoHF has been completed.  Since October 31th PGGM exited hedge funds investments for a total amount of USD 2386 million. As of  December 31st, USD 2442 million had been returned to PFZW. PGGM hence generated a return of USD 56 million for PFZW during the liquidation process. The successful liquidation process of PFZW’s capital was driven by skillful use of the unique operational infrastructure PGGM has in place as well as accommodating market circumstances.

PGGM started investing in hedge funds for PFZW in 2003 through Fund of Hedge Funds. After the financial crisis in 2008/09, the hedge fund program was reviewed and PFZW in collaboration with its asset manager PGGM decided to re-think the way investments in hedge funds were implemented.

In 2010 PGGM chose to manage the hedge fund investments in a new way and started the implementation of a so-called Institutional Managed Account Platform (IMAP). This  platform, which was unique in the hedge fund sector,  allowed PGGM to control all operational aspects of direct investments in hedge funds. For this innovative platform PGGM twice received the Financial News Awards for ‘Most pioneering European institutional investor in hedge funds’.

The platform generally enabled strong oversight and governance. As an example, PGGM was able to fully implement the exclusion list of PFZW for assets held on the platform. The benefits of the platform were obvious, most recently, after the decision by PFZW to exit hedge funds, as it has facilitated a seamless liquidation of the assets for PFZW. PGGM has been very pleased with the services received from its key service providers in operating the platform, which has contributed to that assets held on the platform have outperformed compared to the defined benchmarks.

On behalf of the pension funds it represents, PGGM HF team has successfully fought industry standards of high fees and as a result fee levels have gone down substantially over the years for its clients. While still high compared to traditional asset classes, at PGGM it is arguably among the lowest of any hedge fund investor in the world.

Chief Investment Officer Private Markets

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