PAAMCO Gives Pensions New Vehicle To Bet On Hedge Funds

Feb 2 2018 | 7:08pm ET

Institutional investment firm Pacific Alternative Asset Management Co. (PAAMCO) is giving institutional investors like pension funds a new way to bet on stocks with big hedge fund managers.

The firm, which focuses on hedge funds, is introducing PAAMCO Select, a stock portfolio whose assets are allocated to a number of hedge fund managers who will make bets on stocks for investors who are seeking more than what the average index fund can provide, according to a report by Reuters.

The report quotes Carrie McCabe, a managing director at PAAMCO who came up with the idea and will be the portfolio’s chief investment officer, as saying that, “This business is going to marry the clients’ needs for higher returns and the hedge fund managers’ skills in picking great stocks.”  

The fund, housed within a unit of Irvine, Calif.-based PAAMCO’s Prisma Holdings, has more than $30 billion in assets under management and advisement,

Hedge funds, known for their hefty fees and a string of poor performance in recent years, are having a tough time raising money. Meanwhile, pension funds are under pressure to beef up returns and have been looking for unique strategies that can outperform market indexes.

McCabe has spent three decades in the hedge fund industry at organizations including Blackstone Alternative Asset Management, Financial Risk Management and McKinsey & Co.

Representatives for the firm have yet to identify which hedge funds will be part of the firm’s new offering, but they have been described as being run by a dozen long-established managers who oversee billions in assets and specialize in selecting large-cap stocks.

Last year’s performance was the best since 2013 for the $3 trillion hedge fund industry, with the average fund gaining 8.5%, Hedge Fund Research data show. But many funds still trailed their benchmarks, with the S&P 500 index gaining 22%.

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