Key Takeaways
- • Merced County Employees' Retirement Association (MCERA) committed $5 million to a volatility arbitrage hedge fund managed by Laurion Capital Management as of March 28, 2018.
- • The $1.3 billion pension fund's board approved the allocation, signaling continued institutional investor appetite for alternative strategies beyond traditional equity and fixed-income holdings.
- • Volatility arbitrage strategies capitalize on pricing inefficiencies in options and derivatives markets, representing a specialist hedge fund category within institutional portfolios.
Summary
Merced County Employees' Retirement Association invested $5 million in a volatility arbitrage hedge fund managed by Laurion Capital Management, according to reporting from Pensions & Investments on March 28, 2018. The allocation reflects the $1.3 billion pension fund's strategic diversification into alternative investment strategies as part of its broader asset allocation framework.
Volatility arbitrage hedge funds employ systematic trading strategies designed to profit from mispricings between implied and realized volatility in options and derivatives markets. This category of alternative investments typically appeals to institutional investors seeking non-correlated returns and downside protection during periods of market stress. The deployment of capital by MCERA, a public pension fund managing retirement benefits for Merced County employees, underscores institutional investor confidence in specialized hedge fund strategies during the 2018 market environment.
The investment decision by MCERA's board reflects broader institutional trends toward hedge fund allocations in public pension portfolios. By committing funds to volatility-focused strategies alongside private equity, infrastructure, and other alternative asset classes, the pension fund sought to achieve diversification benefits and enhanced risk-adjusted returns across its investment program.
Volatility arbitrage hedge funds employ systematic trading strategies designed to profit from mispricings between implied and realized volatility in options and derivatives markets. This category of alternative investments typically appeals to institutional investors seeking non-correlated returns and downside protection during periods of market stress. The deployment of capital by MCERA, a public pension fund managing retirement benefits for Merced County employees, underscores institutional investor confidence in specialized hedge fund strategies during the 2018 market environment.
The investment decision by MCERA's board reflects broader institutional trends toward hedge fund allocations in public pension portfolios. By committing funds to volatility-focused strategies alongside private equity, infrastructure, and other alternative asset classes, the pension fund sought to achieve diversification benefits and enhanced risk-adjusted returns across its investment program.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.