Investors looking to follow the strategies of hedge fund heavyweights were the big winners when a major pension plan announced last week that it was cutting a $4 billion slate of high-cost managers, according to industry experts.
The California Public Employees' Retirement System is the largest public pension manager in the U.S., so its move carried wide ramifications.
"CalPERS was a dream come true," Adam Patti, founder and CEO of hedge fund replication company IndexIQ, said on the sidelines of the Morningstar ETF Conference in Chicago, which concluded Sept. 19. "They are the leader, and when they do something, others will follow."
CalPERS didn't say how the hedge fund cash would be reallocated, but the move was still seen as a victory for critics of hedge funds' relatively high fees and low transparency and liquidity.
"This is the story we've been telling for years: that you can get the benefit of being hedged, the diversification ... without paying the two and 20 (fees), without dealing with the tax inefficiencies, without dealing with the complexity of hedge funds," added Patti.