01/26/2011

MFA Aiming Pitch at Institutional Investors

After two years spent pleading its case to Washington lawmakers, the Managed Funds Association is setting its sights on a new audience: big institutional investors.

The hedge fund industry's top lobbying group plans to use its “Network 2011” conference in Palm Beach, Fla., next week to kick off a public-relations campaign aimed at attracting more investments from college endowments, foundations, pensions and other large institutions. Some 800 industry professionals are signed up to attend the three-day event, which opens Jan. 30 at the Breakers.

With the Dodd-Frank Act now in the books, the MFA is turning its attention from regulatory reform to an issue that continues to challenge the industry more than two years after the financial crisis: the sluggish fund-raising environment. Hedge fund managers are especially eager to attract “sticky money” from large institutions, which generally have long-term investment horizons and aren't as likely to redeem when the market hits a rough patch.

To make its case to endowment managers and pension chief investment officers, the MFA plans to dispatch staffers and other industry professionals to convene investor roundtables and speak at events that draw large investors. Among other things, the MFA will highlight the challenges institutional investors face in meeting their obligations. A study released in October by Northwestern University and University of Rochester found that state pension plans alone were underfunded by a combined $3 trillion. In many cases, the pension boards have assumed unrealistic annual returns of 8% or more.

The MFA's campaign gets under way just as the industry seems finally to have turned the corner on the financial crisis. Net inflows to hedge funds last year totaled $55 billion — the most since 2007, according to the latest data from Hedge Fund Research. And paid registrations for “Network 2011,” the MFA's premier event, are at an all-time high.

The MFA is expected to waste little time making its case to institutional investors. Among those signed up to attend next week's conference are Ash Williams, chief investment officer of the $140 billion Florida State Board; Kevin Britton, director of absolute return strategies for Cornell University's $4 billion endowment; and James Dunn, chief investment officer of the $1.3 billion endowment at Wake Forest University.

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