US pension funds upping hedge fund stake

At a time when most investors are becoming increasingly weary of high risk hedge funds, public pension funds in several US states are upping their stake, hoping to make up for recent lackluster performances.

New York State has a cap that limits the amount of alternative investments in the state’s Common Retirement Fund, valued at $153.9 billion, with Comptroller Thomas DiNapoli urging lawmakers to increase that cap, saying that “we need more flexibility.” The Common Retirement Fund has followed in the footsteps of other lagging pension funds, posting only a 2.6 percent gain for the year ending March 31. As of now, the fund may allocate up to 25 percent of its capital to alternative investments...more>>

Meanwhile, the Massachusetts Pension Reserves Investment Management Board has awarded $540m in mandates to fund of hedge fund managers as part of a dramatic shift from a domestic equities strategy to alternatives.

Blackstone's Alternative Asset Management division will manage $200m while Austin Capital Management and EIM Group will manage $170m each, according to Stanley Mavromates, the chief investment officer for the board. A global survey of 99 alternative asset managers published last month by pension fund adviser Watson Wyatt found that Blackstone Alternative Asset Management won $15.4bn worth of mandates from pension funds for fund of hedge fund mandates last year, more than other fund managers in the subset...more>>

Finally a New Jersey court has given the all clear for pension fund investment in alternatives: the State of New Jersey will be able to invest some pension money in alternative investments, after a court rejected a union bid to keep the money out of them. A state court gave the Garden State’s Treasury Dept. permission to move forward with a plan to put about $9 billion, or 11.5%, of the state’s $78 billion in pension assets into hedge funds and other alternatives.

The ruling comes as a new report shows the state pension systems is even farther from being able to meet its commitments than previously thought, with studies showing that more police and firefighters than expected are retiring with disabilities, leaving a gap of some $550 million...more>>