Hartford Business – State Treasurer Denise L. Nappier said she plans to approve rule changes by January allowing her to allocate up to 8 percent of the state’s $20 billion pension fund in nontraditional investments such as hedge funds.
The move marks a departure from a more conservative investment strategy and comes shortly after the Connecticut funds lost nearly $5 billion in pension assets in the depressed market.
The shift in approach also comes when the hedge fund industry is under stress. The sector’s total assets declined by more than 20 percent between June and October, and the unraveling of Bernard Madoff’s $50 billion Ponzi scheme this month has spotlighted what many see as a general lack of transparency in the industry.
Still, Nappier said investing in hedge funds and other alternative instruments will allow the pension plan to reduce volatility, produce slightly higher returns and create better diversification.