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A new industry has had just about enough of hedge funds.....and it's not pension funds. Upset with market-trailing returns and hefty fees, insurance companies are reversing course after more than doubling their hedge fund allocation over the past five years. This month, AIG and MetLife have announced redemption notices for $4.1bn and $1.8bn of their respective hedge fund holdings.
Loews Corp. CEO James Tisch, whose firm owns the insurer CNA Financial Corp., said three years ago that he counted on hedge funds to add “zip” to the portfolio. This month, he said on a conference call that returns have been “competed away” and that CNA has been reducing its allocation. “They’re not getting out altogether,” Malloy said insurers. “They’re just taking a more discerning view of where they’re allocating their dollars, and they’re going to stick with firms or strategies and managers that have performed to expectations or exceeded expectations.”
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