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Reuters – The California Public Employees’ Retirement System (Calpers), which manages $169 billion in public pension funds, may boost its private-equity investments by around 40 percent as slumping markets create some acquisition bargains.
Calpers’ board next week is scheduled to vote on a plan that would increase the fund’s target for corporate buyout and venture-capital investments to 14 percent from 10 percent.
Spokesman Clark McKinley said the fund’s $22.8 billion of such investments has jumped to 13 percent as the sinking value of stocks and other assets reduced the size of the overall fund.
BusinessWeek – For years pension funds, university endowments, and other big investors essentially wrote blank checks to hedge funds and private equity firms. They readily paid stiff fees and agreed to onerous restrictions. Investors had no choice if they wanted access to the money managers and outsize gains.
All that is changing. With returns dismal and cash scarce, investors are demanding—and winning—concessions on everything from cost to oversight. "The balance of power has shifted," says a private equity executive.
In recent months some of the biggest institutional investors, including the $175 billion California Public Employees’ Retirement System, have gathered at closed-door meetings in New York and Toronto to talk about ways they might flex their newfound muscle. A number of public pensions, such as the $16 billion Utah Retirement System, have pushed firms publicly to ease terms.
Pensions & Investments – CalPERS is boldly going where no pension fund has gone before with hedge funds.
The $175 billion California Public Employees’ Retirement System, Sacramento, will be the first pension fund to move its $4.6 billion portfolio of 26 direct hedge funds to separately managed vehicles (managed accounts in hedge fund parlance) from commingled hedge funds, according to sources.
The proposed creation of a CalPERS-owned multistrategy hedge fund that will provide an incubation platform for promising emerging hedge fund managers is another first among pension funds, industry observers said.
Philadelphia Inquirer – Pension funds for Pennsylvania state workers and schoolteachers lost more than $12 billion in the three months ended Sept. 30.
And that’s not counting losses from hedge funds, real estate, private equity, and other hard-to-trace private investments – roughly half of the State Employees’ Retirement System – that pension managers don’t plan to disclose until next year.
New York (HedgeCo.Net) – At a time when most investors are becoming increasingly weary of high risk hedge funds, public pension funds 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. Comptroller Thomas DiNapoli is 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. DiNapoli did not state how much he wanted that number increased.
Public funds manage over $2 trillion in assets and are actively seeking ways to garner larger returns. However, some argue that market conditions are not favorable enough to start taking wild risks with taxpayer money. Alternative Investments may include hedge funds, private equity funds, or anything that invests in real estate and/or commodities such as oil or gold.
One of Amaranth Advisor’s major investors was the state of Massachusetts, who allocated a substantial amount from its Pension Reserves Investment Trust Fund. When the fund imploded thanks to some bad bets magnified by massive amounts of leverage, followed by the closing of Sowood Capital Management the following summer, the state fund was out $80 million.
In Orange County, the Employees’ Retirement System has invested 7% of their assets into the reputable BlackRock, as well as to Pacific Alternative Asset Management Company. The fund of funds will handle over $200 million of assets. In addition, South Carolina may invest over $13 billion of their total assets worth $29 billion in hedge funds and other alternative investment vehicles.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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