XL Chief Is Trimming Hedge Fund Wagers in $38 Billion Portfolio

(Bloomberg) -- XL Group Ltd., the insurer with about $38 billion of investments, is reducing its exposure to hedge funds, Chief Executive Officer Mike McGavick said.

“We still do see some value there, but at this time we’ve seen it advantageous to rotate some of that money into different classes,” McGavick said Wednesday at an industry conference in Miami, without specifying which assets he was buying. “That has helped us with our investment yield.”

XL is among insurers including American International Group Inc. and MetLife Inc. that have shrunk allocations to hedge funds after years of high fees and performance that lagged benchmarks. Warren Buffett, whose Berkshire Hathaway Inc. owns insurers Geico and National Indemnity, has long slammed the money managers for a poor track record of returns.

XL’s hedge fund portfolio rose 4.7 percent in the nine months through Sept. 30, compared with a 1 percent loss in the same period a year earlier, according to a third-quarter regulatory filing. By comparison, its public equity portfolio climbed 10.5 percent in the period.

“We have been in hedge funds a long time, we have had a great run in them,” McGavick said. “That has been coming down, but you shouldn’t read that as a decision that that asset class no longer has any value.”

--With assistance from Katherine Chiglinsky

To contact the reporter on this story: Sonali Basak in New York at sbasak7@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steven Crabill, Steve Dickson

©2018 Bloomberg L.P.