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* Ontario Teachers cuts allocations to 10 funds - sources
* Ditches funds that are too similar
* Cardwell, KeyQuant among firms to face redemptions
By Maiya Keidan
LONDON, Sept 23 (Reuters) - Canada's third-largest public pension plan has halved the number of computer-driven hedge funds in its investment portfolio and put more money into the funds its sticking with, sources with knowledge of the matter told Reuters.
The Ontario Teachers' Pension Plan this summer pulled cash from 10 of the 20 hedge funds in its portfolio which use computer algorithms to choose when to buy and sell, two of the sources said.
Ontario Teachers' allocates $11.4 billion to hedge funds, making it the fourth-largest North American investor in the industry, data from research house Preqin showed.
Hedge funds worldwide are under increasing pressure in the wake of poor or flat returns as well as investors' efforts to cut costs. Data from industry tracker Eurekahedge showed that investors have pulled money from hedge funds globally every month in the four months to end-August.
One of the hedge funds that received more funds from the Ontario Teachers' Pension Plan said it had told them it was looking for funds which offered a different strategy from other funds.
"They expressed that a lot of strategies today you can mimic with a few exchange-traded funds or create synthetic products and there is no reason to pay management or performance fees," the source said.
Another hedge fund which the Canada fund dropped said the pension scheme had said it wanted to avoid funds invested in similar underlying assets.
Some of the computer-driven hedge funds the Ontario Teachers' pulled money from followed market trends, such as Paris-based KeyQuant, which has more than $200 million in assets under management, according to its website.
The Ontario scheme also withdrew $65 million in June from trend-follower Cardwell Investment Technologies, a move which ultimately led to it shutting its doors this summer, one of the sources said.
Those funds to receive a boost offered a more specialist set of skills, such as London-based computer-driven currency hedge fund Sequoia Capital Fund Management, in which the pension fund doubled its investment, a second source said.
Editing by Jane Merriman