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Bloomberg – Massachusetts will cut investments in hedge funds after its public pension plan lost a record 24 percent on all assets in the fiscal year ended June 30.
The state pension plan’s board of trustees voted today to lower the amount of money invested in hedge funds to 8 percent, or about $3 billion of the $37.7 billion it oversaw at the end of June, from 12 percent, which is about $4.5 billion. The vote reversed a five-year effort by the pension system to boost returns by expanding such alternative investments.
”We all have to understand we’re making a bet on what assets will do well,” said state Treasurer Timothy Cahill, chairman of Massachusetts’s pension reserve investment management board. “Ultimately, we don’t make decisions based on the short-term, but we get measured on the short-term.”
Boston Globe – He is a close political ally and prodigious fund-raiser for state Treasurer Timothy P. Cahill. When a blue-chip New York financial firm was trying to persuade Cahill and his staff to award it a lucrative contract to manage state pension money, it hired Anthony S. Rust to push their cause.
In the end, the payday was a big one for everyone involved. Ivy Asset Management was awarded the contract in 2004 to manage $393 million in state pension funds, a deal that would net it about $18.3 million in fees, according to state records. Ivy paid Rust an estimated $2.3 million for brokering the deal, according to the records.
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.
