The nation’s largest public-pension fund turned an investment conference into a career fair, asking attending representatives of the hedge fund industry to consider dropping it a résumé. Read more »
SEC enforcement orders against low-grade investment hucksters are among my favorite literary genres, full of oddball characters, devious drama, and silly names for hedge funds. Part of me wants the SEC to just issue fake enforcement orders when they don’t have any real cases – no one would know the difference, and I would read them all1 – but I guess you can’t, as they say, make this stuff up.
Today there is Umesh Tandon, “the CEO of Chicago-based investment advisory firm Simran Capital Management,” who, remembering the old adage that it takes money to make money, told CalPERS that he was a big-shot hedge fund manager when he was in fact a small-shot hedge fund manager. In hindsight this should have been obvious because, I mean, just look at what he named his hedge funds:
Simran served as a subadviser to funds managed by other advisers and provided advisory services to its own private onshore fund (Simran Pre-Event Driven Activist Opportunity Fund LP) and a private offshore fund (Simran Pre-Event Driven Activist Opportunity Fund Ltd), both of which fed into a master fund.
“Pre-Event Driven Activist Opportunity Fund” is my new favorite fraudulent hedge fund name. Surely “pre-event driven” should mean “we trade on inside information,” though realistically it means “we have no idea what we’re talking about.” Also amazingly the fund did, or supposedly did, something totally unrelated to events, activism, opportunity, whatever: “Tandon marketed Simran as an experienced fixed income manager that applied a unique risk-averse strategy bearing a low correlation to equity and debt markets.” Perhaps the unique strategy was fraud.
Though, considering that name, Tandon’s fraud was surprisingly mild: Read more »
What is CalPERS’s job? There’s actually an answer: it’s to “Provide responsible and efficient stewardship of the System to deliver promised retirement and health benefits, while promoting wellness and retirement security for members and beneficiaries.” I suppose “the System” is defined somewhere, and blah blah blah health benefits and wellness and beneficiaries, but I prefer to stop at the capitalized abstraction: CalPERS provides responsible and efficient stewardship of the System.
“Responsible” and “efficient” can conflict, though:
The second-largest pension fund in the United States is considering a move to an all-passive portfolio while at the same time, the largest brokerage firms are falling over themselves to push passively managed exchange-traded funds. The California Public Employees’ Retirement System’s investment committee started a review of its investment beliefs last week, with the main focus on its active managers ….
CalPERS oversees about $255 billion in assets, more than half of which already is invested in passive strategies. … “CalPERS investment consultant Allan Emkin told the investment committee that at any given time, around a quarter of external managers will be outperforming their benchmarks, but he said the question is whether those managers that are doing well are canceled out by other managers that are underperforming.”
So: financial markets exist to allocate capital to its most productive uses.1 One use of capital that may not be all that productive is allocating capital, so it’s understandable that rich sophisticated capital-allocators like CalPERS would allocate less capital to the business of allocating capital. Why spend so much money on external active manager fees when they turn out not to be that good at active management? Just index, right? Read more »