Washington Post- Determined to keep its promise to the state’s public employees, teachers, police officers and firefighters, the Montana pension system may venture into a high-stakes corner of the investment world: hedge funds.
The idea was proposed in two recent studies commissioned by the $8 billion retirement system, which also recommended opening up to other nontraditional investments to keep generating the annual returns necessary to meet its obligation to retirees.
“That’s what [they] indicated we needed to make our 8 percent return,” said Carroll South, executive director of the board, which oversees investing for all state funds, including nine pension funds. “Over the last 12 years, we have slightly beaten the 8 percent requirement. But no one expects the public-equity market to return what it has going forward.”
With a flood of baby boomers set to retire in coming years, pension funds across the country are shedding their stodgy stocks-and-bonds-only portfolios and ratcheting up investments in hedge funds. The move comes as hedge fund returns have cooled, as two high-profile hedge funds came close to failing and as concerns have mounted that more problems are around the corner.
