By Susan Barreto, Editor of Alternatives Watch
Even as hedge fund performance has been mixed during the last few weeks, institutional investors are still writing out tickets as interest picks up in uncorrelated assets to long-only equites.
In March, pension funds poured assets into the space and plotted future allocations with $1.5 billion in mandates tracked by Alternatives Watch. (See the full listing below).
The University of Texas Investment Management Co. (UTIMCO) trustees in Austin reviewed at length their investment portfolio in light of the COVID-19 related market impacts including their hedge fund portfolio that is still being built out following a split in 2018 between directional hedge fund strategies and stable value strategies.
The March 24 board meeting was done over the phone due to COVID-19 outbreak concerns and staffers for the $50.5 billion investment fund are also working from home. In the coming months, the hedge fund investment team is planning to deploy $700 million plus to reach stable value asset allocation target of 10%. Officials are seeking to fund two to four stable value mandates by August 2020.
Tony Caruso, senior director at UTIMCO, heads up the stable value effort at the fund. He joined the endowment in 2018 from fund of hedge funds Mesirow, where he headed the non-directional strategies portfolio.
According to UTIMCO’s investment policy stable value hedge fund investments exhibit little to no market sensitivity, as defined by beta to U.S. public equity, and have an absolute return orientation. Strategies may include but are not limited to market-neutral equity, multi-strategy, re-insurance, risk premia, trend following, senior secured lending and global macro.
Other allocators are closely watching their hedge fund portfolios as the market swings become even more unpredictable.
Los Angeles County Employees Retirement Association (LACERA) CIO Jonathan Grabel told viewers of CNBC earlier this month that the $59 billion pension fund’s illiquid investment portfolio has indeed been helpful in navigating the current spectacular downturn in markets.
he $60 billion Los Angeles County Employees’ Retirement Association (LACERA) revealed finalists in the hedge fund emerging manager separate account mandate and for dedicated managed account services.
The finalists for the $200 million mandate for emerging manager hedge fund are: Appomattox Advisory; BlackRock; Goldman Sachs Asset Management; GCM Grosvenor; New Alpha Asset Management; PAAMCO Prisma; The Rock Creek Group; and Stable Asset Management.
For the dedicated managed account services search there are even more firms in the running. They are: Blueprint Capital Advisors; HedgeMark Advisors; HFR Investments; Innocap; Lighthouse Investment Partners; Lyxor Asset Management; Man FRM; Maples Group; Monroe Capital; Ultimus LeverPoint Private Fund Solutions; and Wilshire Associates.
Ultimately though the pension system expects the use of the platform to encompass existing and future investments across various investment categories that include hedge funds and credit strategies. Use of the platform will depend on the benefits afforded with the DMA structure.
LACERA following market decline has raised more than $1 billion in cash by selling out of global equities and hedge funds, according to the latest chief investment officer report to trustees. A total of $273 million was liquidated from the hedge fund portfolio.
Other allocators have remained active with the Madison-based investment giant SWIB added $655 million to hedge funds in the last month. The Massachusetts Pension Reserves Investment Management Board in Boston, meanwhile, added $350 million to hedge fund strategies structured in separately managed accounts.
While the size and scope of the strategies selected varied widely, investors overall are united in their aims of diversifying away long-term equity risk in their portfolios.
|March 2020 |
Hedge Fund/CTA allocations
|Manager/Fund name||Amount (US$m)|
|Cerberus Real Estate Debt Fund||$150|
Texas County & District Ret. System
|Cerberus Capital Management||$200||Teachers’ Retirement System of Illinois|
|Kirkoswald Asset Management||$75||Teachers’ Retirement System of Illinois|
|Trend Capital Management||$50||Teachers’ Retirement System of Illinois|
|Two Sigma Absolute Return||$25||State of Wisconsin Investment Board|
|Two Sigma Risk Premia||$50||State of Wisconsin Investment Board|
|Davidson Kempner||$20||State of Wisconsin Investment Board|
|Voleon Investors||$37.50||State of Wisconsin Investment Board|
|Voleon Institutional||$112.50||State of Wisconsin Investment Board|
|Elliott Associates||$420||State of Wisconsin Investment Board|
|BlackRock Event Driven Equity Fund||$45||Sacramento County Employees’ RS|
|PGIM Global Liquidity||$20||Ohio School Employees’ Ret. Sys.|
|Serenitas Credit Gamma Strategy (SMA)||$150||Massachusetts PRIM|
|Fir Tree SPAC Opportunities (SMA)||$150||Massachusetts PRIM|
|CKC Credit Opportunity||$50||Massachusetts PRIM|