By Anastasia Donde
Everybody knows you shouldn't put all your eggs in one basket—but how many baskets should you put them in? There is such a thing as overdiversification, and that worries Bob Borden, chief investment officer of South Carolina Retirement Systems. The $25 billion state fund has exposure to about 350 hedge funds through the $6 billion it has invested in single- and multistrategy hedge funds as well as funds of funds, and Borden is concerned that his alpha is becoming diluted. When you're invested in 350 hedge funds, he frets, instead of beating the market, "you have so many strategies that you are the market."
Bob Borden
Borden's response has been to prepare an investment plan that will reduce the number of hedge funds to somewhere between 50 and 150—the exact number will depend on how many fund-of-funds managers South Carolina decides to keep. Borden discussed his plan...