Wall Street Journal- Pension funds — traditionally among the stodgiest investors around — are starting to dabble in hedge funds, real estate and other “alternative” investments once considered toodicey. Now, a major fund in Texas is about to place a much bigger bet.
The Teacher Retirement System of Texas is planning to shift about one-third of its $112 billion in assets to alternative investments. It’s one of the largest-ever pension-fund wagers on investments like these.
Manning the controls is T. Britton Harris IV, the new chief investment officer at the Texas Teachers fund and — briefly — the former chief executive officer at Bridgewater Associates, the Connecticut-based hedge-fund group with about $165 billion under management.
Mr. Harris’s strategy aims to boost returns by a modest 1% annually, though that would earn his fund an additional $1 billion a year. “We’ll be able to produce these higher returns with the same level of risk,” Mr. Harris, 49 years old, says.
Alternative assets like these, he points out, usually don’t move in lockstep with stocks and bonds, helping to diversify a portfolio. “Investment in alternative assets has not hurt returns at other pension funds,” he says. “They have helped returns.”
His critics, however, are wary. The recent meltdown by two Bear Stearns hedge funds that invested in subprime mortgages was the most recent reminder of the potential risks involved. And less than a year ago, the hedge fund Amaranth Advisors squandered an unknown amount of pension-fund money while losing $6 billion on natural-gas bets that went wrong.
