Why did you exit your hedge fund investments with Brevan Howard?
CR: The principle reason was transparency; it is not much more complicated than that. What we need in any investment we make is to have a good degree of certainty and comfort and at that time a decision was taken we did not have sufficient transparency, so we put in a redemption. We have some hedge fund exposure today in relative value fixed income strategies, so it is a bit of a myth we don’t. We are actively reviewing the total return part of the portfolio and it is
my job to convince the board that something is an investable asset if there is demonstrable value, it is transparent and cost-effective.
How are you addressing fees in the portfolio?
TD: LPFA has started to invest in funds on a special relationship basis and then co-investing. Co-invest is discretionary, therefore Chris and his team can do that when they feel it is appropriate and the fees tend to be dramatically lower, sometimes zero. That is a massive cost saving because if you think about the two-and-20 model in private equity, that is 2% on commitment not drawdown, so co-investment significantly reduces the total expense ratio.
CR: We stopped making fund-of-fund investments and we have moved on to this combination of making selective commitments to primary funds to build up strategic relationships. We are also working strategically with one or two managers to help source and underwrite co-investment flow in the private equity space. In the last 12 months we have started to directly underwrite those co-investments.
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