(Bloomberg) — Canada’s largest pension is planning to roughly double the money it invests in hedge funds over the next five to seven years, a bullish signal from one of the industry’s most important backers.
The Canada Pension Plan Investment Board plans to boost its total hedge fund allocation to about $160 billion in the coming years, according to people familiar with the matter. It is particularly interested in gaining exposure to hedge fund giants it doesn’t currently invest with, including Izzy Englander’s Millennium Management, said the people, asking not to be named discussing internal deliberations.
The C$866 billion ($608 billion) pension currently has about $80 billion invested in hedge funds, according to the people. The expansion plans come as CPPIB expects its total assets to roughly double over the next seven years, and after hedge funds helped it outperform internal benchmarks in the last fiscal year.
External hedge fund investments were largely responsible for the $3.4 billion of net income generated by its Capital Markets and Factor Investing segment in the 12 months ended March, according to CPPIB’s annual report.
A representative for CPPIB declined to comment on its plans.
The bullish call is a bright spot for the hedge fund world, which was battered over the past month as volatile markets bled even the sharpest money managers. Struggling funds have been firing staff and returning capital as some posted their worst-ever monthly performances in October.
Heather Tobin, who leads the CPPIB unit that invests in hedge funds, told a podcast this month it is important to have access to both large multistrategy funds as well as money managers with a sector or strategy specialty. Volatile markets and higher rates create a “very favorable” setup for skilled managers, she said.
CPPIB has exposure to some funds that have struggled lately, such as Rob Pohly’s Samlyn Capital and Hamza Lemssouguer’s Arini Capital Management, according to the pension’s website. Tobin’s unit invests in more than 60 fund managers in total, including hedge funds Two Sigma Investments, Bridgewater Associates, ExodusPoint Capital Management, Rokos Capital Management and Magnetar Capital.
Specific strategies that helped boost CPPIB’s gains in the last fiscal year included quant equity, global macro, multistrategy, fundamental equity and fixed income, according to the annual report.
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