Podcast Summary: Capital Allocators – CIO Greatest Hits: Hedge Funds

Panelists:

• Dan Fagan (GIC – Government of Singapore Investment Corporation)
• Craig Bergstrom (Corbin Capital Partners)
• Adam Blitz (Evanston Capital Partners)
  Host: Ted Seides
  Date: August 18, 2025
  Theme: Insights from institutional hedge fund allocators on building, managing, and evolving top-tier hedge fund portfolios, with deep dives on manager selection, risk, current opportunities, fee structures, and industry evolution.

Episode Overview

This episode features a roundtable with three leading CIOs and hedge fund allocators, discussing how large institutional investors allocate to hedge funds, manage risk, seek alpha, and adapt to a rapidly changing market environment. The conversation delivers actionable ideas on manager selection, portfolio construction, liquidity, industry structural changes, and where the most and least attractive opportunities lie today.

Major Discussion Points & Insights

1. Program Overview and Objectives

| [06:36–09:26]

• Each panelist highlights their institution’s approach to hedge fund investing:

  • Dan Fagan (GIC):

    • GIC is Singapore's sovereign wealth fund with a large, decades-old hedge fund program.
    • The fund seeks to generate long-term, real returns above inflation for Singapore.
    • Hedge funds provide valuable diversification and are selected for their differentiated "edge" compared to the core portfolio:

      "We see hedge funds as very important vehicles in the portfolio of active management... they can provide very valuable diversification." (06:58)

  • Craig Bergstrom (Corbin):

    • Corbin manages ~$8.5B, with $5B in modern fund-of-hedge-funds structures.
    • Focus is on advanced manager selection and niche strategies.

  • Adam Blitz (Evanston):

    • Evanston manages ~$4.3B, mostly in hedge funds.
    • Core focus: attractive risk-adjusted returns, often via early-stage, "hungry" managers.

2. Investment Approach and Manager Selection

| [09:26–12:19]

• All panelists emphasize a bottom-up, manager selection-driven process over top-down asset allocation.

  • They believe truly outstanding hedge fund opportunities are rare.
  • Preference for finding "exceptional" managers, even if they manage modest sums, rather than filling buckets by strategy.

  Notable Quotes:

  • Dan Fagan:

    "We are...strategy agnostic...When we find something truly compelling, we pursue it." (09:39)

  • Adam Blitz:

    "Our whole job is to identify and gain access to...early stage managers who aren't managing a lot of money...those are the ones we tend to prefer." (11:41)

3. Evolution of Hedge Fund Platforms

| [12:19–13:14]

• Craig, referencing Corbin’s platform:
  • Adoption of advanced structures such as separately managed accounts (SMAs) and internal trading for select opportunities (CLOs, CBOs).
  • Sees industry as moving to “hedge funds 2.0/3.0”.

4. Impact of Rising Rates on Hedge Funds

| [13:14–16:48]

• How do higher interest rates impact hedge fund portfolios?

  • Craig: Most strategies become more attractive linearly with higher short-term rates.
  • Adam: Expected returns now exceed typical 5-6% annual payout needs for endowments, making hedge funds more relevant.
  • Dan: Allocators must be prepared for a wider range of economic scenarios, not just higher rates—e.g., credit cycles, stagflation.

  Notable Quote:

  • Adam Blitz:

    "It's very hard to include a hedge fund strategy...if the total return is only 3% or 4%. But now that we've hopefully cleared that threshold...they might have a role again." (14:26)

5. Allocating Across Strategies vs. Manager Delegation

| [16:48–18:56]

• Debate on the balance between top-down calls and confidence in manager flexibility:

  • Craig: Leans toward empowering flexible managers, making asset allocation shifts “episodically”.
  • Adam: Tactical only in credit—will shift exposure more aggressively during rare "fat pitch" opportunities.

  Notable Quotes:

  • Craig:

    "It's so challenging to drive value through asset allocation as opposed to manager selection." (17:04)

  • Adam:

    "Credit is really the one area we're the most tactical on." (18:00)

6. Liquidity Management

| [19:40–22:18]

• Adam: Meticulous about matching liquidity terms to strategy; warns of hidden risks in perceived liquidity especially in stressed markets. Manages a "liquidity spreadsheet" to ensure quarterly maneuverability.

• Dan: Emphasizes understanding both the direct and indirect (“ecosystem”) implications of liquidity and the industry’s footprint, especially under stress.

  Notable Quotes:

  • Adam Blitz:

    "Liquidity risks right now are underrated and underappreciated...if you need to get out of a fairly sizable position...liquidity is just not great." (20:01)

7. Industry Footprint, Leverage, and Contagion Risk

| [22:18–31:31]

• Dan: Dissects how hedge fund industry gross exposures vastly exceed reported equity capital ($10T+), raising systemic questions.

• Stresses importance of understanding "who your managers are up against", their risk systems, counterparty relationships, liquidity terms, and how deleveraging/cascades can occur in interconnected markets.

• Craig: Favors investing with "single risk taker" managers for alignment, transparency, and easier assessment; less enamored with opaque platforms with thousands of positions.

• Adam: Warns against excessive leverage and commends early-stage managers for manageable size and lower liquidity risk.

  Notable Quotes:

  • Dan Fagan:

    "If you're comfortable with leverage, you are doing something wrong. It's always about the trade-off." (41:24)

  • Craig Bergstrom:

    "A big part of our value proposition is delivering idiosyncratic security selection alpha through to our clients." (28:51)

8. Multi-Manager Platforms: Pros, Cons, and Diligence

| [33:43–47:36]

• Dan: Platforms have historically delivered “levered high-quality alpha” (approximating the tangent portfolio), but warns that “talent” and risk control—not organizational structure—determine success.

• Adam: The “case against” includes high fees, opacity, systemically similar trades, and contagion risk during platform deleveraging.

• Craig: Relationship-building is key to getting real transparency; wary of survivorship bias.

  Notable Quotes:

  • Dan Fagan:

    "The platforms have actually outperformed equities on a total return basis...but...the amount of talent out there...does not support where we are today." (34:02)

  • Adam Blitz:

    "You're really taking a leap of faith, I think as an investor." (45:10)

  • Craig Bergstrom:

    "In my career, a bunch of extremely well regarded multi-strategy managers...went to zero." (47:13)

9. Long/Short Equity and Macro Strategies

| [47:13–61:10]

• Adam: Contrarian advocacy for sector-specialist long/short equity managers: as passive platforms and short-term trading have crowded into the space, the “vacuum” for patient, stock-picking alpha has grown.

  • Sees best opportunities in concentrated, mid-exposure portfolios with rigorous risk controls.
  • Caution about managers with either too low or too high exposure.

• Dan: Value in maintaining exposure to long/short equity beyond just platforms and quant.

• Craig: Ever-pending credit cycles are rarely as fruitful as predicted; flexibility is vital in distressed credit.

• Macro: All agree it’s hard to time, fewer exceptional managers, but valuable as a portfolio diversifier and for “right-tail” dispersion.

  Notable Quotes:

  • Adam Blitz:

    "There's a real vacuum for active stock pickers who think over the medium and long term..." (48:06)

  • Dan Fagan:

    "With all that's said about platforms... you abandon some very valuable potential sources of return, people simply who can hold concentrated stock portfolios through multiple earning cycles." (52:42)

  • Craig Bergstrom:

    "There's a lot of talk about credit investing and the pending cycle. I think we've had what, five pending distressed cycles in the last 10 years and maybe we realized one of them and it was about six weeks." (54:41)

10. Fees, Incentive Hurdles, and Structural Shifts

| [61:41–68:14]

• Rising rates have increased the push for incentive fee “hurdles,” especially as the risk-free component of hedge fund returns rises.

• All argue for more alignment—paying for alpha, not for beta or rate exposure—though negotiation is tough amid high demand for capacity.

• Craig: Sees a trend away from open-end toward closed-end (locked-up) structures in credit, partly driven by incentive structure concerns.

  Notable Quotes:

  • Adam Blitz:

    "We're big believers in hurdles...if you're paying a 20% incentive fee, you're effectively paying another 80 bps to 1% of fees for no particular reason." (61:56)

11. Current and Avoided Opportunities

| [68:14–72:52]

• Adam: Catastrophe reinsurance—a non-correlated, now well-priced niche.
• Craig: Secondary investments in private credit—a way to buy at discounts, shorten duration, and avoid a J-curve.
• Dan: Meeting entrepreneurial emerging managers in this tough-capital environment—potential for meaningful long-term partnerships.
• Avoidances: Anything highly levered or illiquid; life settlements; and, for Craig, commercial real estate (CRE) is worrisome and due for distress, but may yield future opportunities.

12. Investment Pet Peeves

| [73:46–77:18]

• Dan: Hates the "black box" label for quant strategies—argues many quant funds are actually more transparent than human managers.

• Craig: Dislikes opacity from managers and lack of respect for the allocator’s diligence process.

• Adam: Bemoans how illiquidity premia have become "illiquidity discounts": investors now willingly accept lower returns for more lock-up, which he sees as potentially misaligned with end-investor interests.

  Notable Quotes:

  • Dan Fagan:

    "The real black box is the human investor..." (73:56)

  • Adam Blitz:

    "Somewhere along the way, the last five years or so, the illiquidity premium somehow turned into an illiquidity discount. I don't really understand." (76:08)

Selected Timestamps for Key Segments

• [06:36] Program descriptions, AUM, objectives
• [09:39] Bottom-up, manager-focused investment philosophy
• [13:32] Effects of higher rates on portfolio strategy
• [18:00] Tactical allocation in credit and illiquidity
• [22:18] Industry footprint and systemic risks
• [28:51] Manager structure: single risk-taker vs. platform
• [34:02] Investment case for platform hedge funds
• [41:24] Limits of comfort with leverage
• [47:13] Survivorship bias and structural risks
• [48:06] Bullish view on long/short equity
• [61:56] Fee structure debate and the demand for hurdles
• [68:34] Exciting current opportunities
• [73:56] Pet peeves: Opacity and terminology

Memorable Quotes

• Dan Fagan:

  "We see hedge funds as very important vehicles in the portfolio of active management...they can provide very valuable diversification." (06:58)
  "If you're comfortable with leverage, you are doing something wrong." (41:24)
  "The real black box is the human investor..." (73:56)

• Craig Bergstrom:

  "A big part of our value proposition is delivering idiosyncratic security selection alpha through to our clients." (28:51)

• Adam Blitz:

  "Our whole job is to identify and gain access to...early stage managers who aren't managing a lot of money...those are the ones we tend to prefer." (11:41)
  "There's a real vacuum for active stock pickers who think over the medium and long term..." (48:06)
  "Somewhere along the way, the last five years or so, the illiquidity premium somehow turned into an illiquidity discount. I don't really understand." (76:08)

Episode Takeaways

• The highest value for sophisticated allocators comes from relentless manager selection, partnership-building, and adaptation—not from generic asset allocation.
• As rate environments and industry structures change, so must the fee and liquidity arrangements; alignment—not just returns—is crucial.
• True opportunities may be found in overlooked or less fashionable strategies, from catastrophe reinsurance to emerging managers.
• Transparency, humility, and flexibility are recurring keys to both risk management and outperformance in the complex hedge fund landscape.