Ermitage Group has announced an agreement to license its advanced portfolio management solution – OPTICS – to one of America’s most prominent public pension funds, the California Public Employees’ Retirement System (CalPERS).
CalPERS provide retirement, health, and related financial programs and benefits to more than 1.6 million California public employees, retirees, and their families and more than 3,000 public employers.
The deal follows a successful trial phase earlier in 2010 when CalPERS applied OPTICS to its multi-billion Absolute Return and Global Equity programs. Ermitage has managed a $140m hedge fund portfolio for CalPERS since 2006, but this is the first time it has made its proprietary systems available on a stand-alone licensed basis.
Ermitage has developed OPTICS over four years to provide pension funds and other institutional investors with the ability to create portfolios that can meet their specific needs across different market environments. It also helps investors to integrate alternatives alongside their more traditional long only investments. With many global savings schemes suffering severe pressure from poor return and thus under funding, Ermitage believes it has the right solution to address the needs of this style of investor.
Developed at its Headquarters in Jersey, the OPTICS system takes a forward-looking and ‘real world’ approach to portfolio and risk management. At its heart, it features a series of highly advanced models which help to create portfolios that can take into account the range of market conditions a portfolio may encounter.
A key milestone for Ermitage was in 2006, following the management buyout led by CEO, Ian Cadby. This allowed the firm to accelerate its strategy to be a leading player in the design of hedge fund portfolios and as an investment solutions provider.
The company which also has operations in London and New York, manages over $1.3bn in fund assets on behalf of a global institutional client list that includes prominent pension funds and insurance companies. Its parent company is Caledonia Investments plc – a UK Investment Trust listed on the London Stock Exchange.
Commenting on the news, Ian Cadby, Ermitage Group CEO said:
“We are delighted that CalPERS – who are one of the world’s best known public pension funds – has chosen to be our first external partner for our OPTICS system. Whilst first conceived to manage our own multi-manager portfolios, interest from institutional investors seeking an effective real world portfolio risk management solution led to Ermitage accelerating its external partner programme.”
“The problem for many large institutions is that they struggle to combine the investment views of their various advisors, consultants and product providers into one overall portfolio view that can be effective in more than just the current environment. Our vision is to partner with a select group of global institutions who can use OPTICS to combine traditional long only assets with alternative hedge fund product in order to create a more integrated, holistic view of portfolio construction and risk management. We believe that making proprietary solutions such as OPTICS available to external users will herald the expansion of a new solution-orientated service industry, where clients are able to take greater control of their investments.”
Nick Macleod, MD – Investment Solutions, the creator of the OPTICS system added:
“Investors with liabilities to fund need to establish control over their funding programs. OPTICS helps in that it recognises that changes in market conditions are not mere fluctuations; they are genuine shifts in the environment whose tendency to persist once they become established can disrupt convergence towards long-term average returns and lead to serious funding issues.”