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Hedge Fund Case Study: Understanding the Role of Hedge Funds in Large-Scale Pension Plans

Jonathan Lucas

Jonathan Lucas '16

Jonathan worked with fellow MBA students to create a case study about:
Role of Hedge Funds in Institutional Portfolios: Florida Retirement System

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Top hedge funds, one of the largest pensions in the world, respected consultants, and renowned academics; these are just some of the people I interviewed in the past semester.  I am part of a small group of research assistants to Professor Goetzmann for his forthcoming International Center for Finance raw case that examines the role of hedge funds in an institutional investor’s portfolio.  The impetus for the case is CALPERS’ much publicized decision to divest from hedge funds, but our case study goes beyond their decision to examine the pros and cons of hedge funds, fees, sources of hedge fund returns, asset allocation in large pension funds, and the role consultants play in the process. 

At first I was nervous about this case; I was worried about interviewing industry leaders and asking them thoughtful and relevant questions.  Would I have pertinent questions?  Would I understand a hedge fund’s strategy? Would these individual’s responses be too advanced for my understanding?  However, I quickly realized that SOM had prepared me very well to interview everyone; I have spent hours discussing alphas, betas, arbitrage strategies, economic outlooks, and more much to my delight (and hopefully to the delight of others). 

I also thought getting in touch with industry leaders would be difficult; however, I soon realized the power of the SOM name.  We reached out to many people that had no connection to Yale and found they were very willing to speak with us about the project and they were all very excited to hear that The Yale School of Management was writing a case on this subject.  Our alumni network introduced us to even more people in key positions within the asset management and hedge fund industry, and I quickly learned the strength of the SOM alumni network that I would soon join.  

For me, this case is about more than just connecting with industry leaders, it allows me to meet and work along other SOM students--students I never would have met without this case.  Of the four research assistants on this case, there are two fulltime MBA students, a Masters of Management student, and one Executive MBA student (me).  As an Executive MBA student, who is only on campus a few weekends each month, I have limited opportunity to meet students outside my program.  I really enjoy getting to know and working with the other three students contributing to the case; each of us has a different perspective and each of us is able to add different views and experiences to our research.  I learn as much from my fellow case assistants as I do from the people we interview, and I made three lifelong friends. 

Contributing to this case is a capstone project for me; it truly is the culmination of my time and learning at SOM.  I find myself using the skills and theory that I picked up from the many wonderful classes and professors that I have had the privilege of spending time with during my two years at Yale.  It has also given me the opportunity to spend more time learning from Professor Goetzmann and gaining from his insight and experience into anything and everything that is finance.  I am graduating in May, and am truly sad that I will no longer be spending my weekends at Evans Hall.  I have learned more than I ever imagined, and studied with some of the greatest academics in the world; coming to SOM to earn my MBA was a brilliant decision.  Although my time at Yale is coming to a close, I am happy that I am able to contribute to a case that will be used to teach future students long after I graduate.