Institutional Investor's Alpha Magazine - February 2008 - (Page 20)

Pension Corner they have available to choose stocks.” He says it also made sense to leave the long-short funds in the equity portion of the portfolio because they are being funded by a carveout from the plan’s 48.5 percent domestic long-only allocation. The remainder of the portfolio includes the 17.5 percent spread among infrastructure, private equity and real estate and 17 percent allocations to ﬁxed income and international equity. CRS has already begun to see the beneﬁts of investing in alternatives. Its portfolio was up 14.9 percent in its ﬁscal year ended September 30, 2007, handily beating its ﬁve-year annualized average return of 13.1 percent. Comparatively, public funds with assets greater than $1 billion returned, on average, 15.41 percent and 14.35 percent for the one- and ﬁve-year periods ended last September, according to Santa Monica, California–based Wilshire Associates. As CRS moves into a turbulent 2008, Boudinot hopes the addition of funds of hedge funds will enhance its returns. However, he says it’s unlikely the plan will graduate to direct investments in hedge funds, as he is its only full-time investment professional and lacks the support to research individual managers. administrator of the New Hampshire Retirement System for more than 20 years. When he joined, the plan’s portfolio consisted of a conservative 60 percent allocation to equity and 40 percent to ﬁxed income. Hoping to amplify returns, he encouraged Manchester’s seven-member board to let him move into funds of hedge funds. In December 2005, following a yearlong debate over the risks and merits of funds of hedge funds, Manchester allocated 10 percent of its then–$133 million portfolio to funds managed by New York–based Archstone Partners and Philadelphia’s Attalus Capital. Then last January, Manchester’s board brought on Cambridge, Massachusetts–based New England Pension Consultants to replace Prime, Buchholz & Associates of Portsmouth, New Hampshire, its consultant of more than ten years. After only a month, NEPC helped the plan reorganize its existing investments, introducing a 130/30 strategy — an investment approach that takes 30 percent short positions and then uses the proceeds to help create a 130 percent long position — through a fund managed by Pittsburgh-based Mellon Financial Corp. Now NEPC is guiding Manchester’s entrée into portable alpha — a strategy that transports alpha created by an active manager, often a hedge fund, to the returns of an index like the Standard & Poor’s 500 index, which is replicated using futures. Manchester expects to make its ﬁrst allocation by the end of February. The portfolio currently has 47 percent in equities, 17 percent in ﬁ xed income, 10 percent in funds of hedge funds, 7 percent in real estate, 1 percent in private equity, 2 percent in cash and a 16 percent tactical asset allocation — a category comprising actively managed funds that seek to proﬁt from relative mispricings across domestic and international assets. The plan’s ﬁscal year return for the period ended September 30, 2007, was 11.3 percent, compared with an average 14.16 percent return among all public pension funds for the same period, according to Santa Monica, California–based Wilshire Associates. Fleury believes that as the impact of the hedge funds and portable alpha on the portfolio becomes clearer, his board will allow him to add increasingly complex investment vehicles. “As we build a track record we can look back at these strategies and say, ‘This is doing what we were told it would do,’” he explains. — K.G. Manchester Employees’ Contributory Retirement System autiously liberal — that’s how Gerry Fleury describes the investment approach he is taking for New Hampshire’s $150 million Manchester Employees’ Contributory Retirement System. Despite being small, the plan already has 10 percent of its portfolio in funds of hedge funds and is gearing up to add a portable alpha program as well. “We’re a relatively small player, but our size hasn’t affected our investment style,” says Fleury, 57, Manchester’s executive director. He says the fairly loose constraints New Hampshire imposes on its public pension funds give him the ability to invest more freely than most small public plans. Fleury joined Manchester in 2004, after working as an C MANDATES In an effort to protect themselves against volatile equity markets, 65 percent of pension plans expect to increase their hedge fund allocations in 2008, according to a recent study by Lincolnshire, Illinois–based consulting ﬁrm Hewitt Associates. SEARCHES* Investor New Jersey Division of Investment Pension Fund Association (Japan) Assets ($ millions) $ 81,800 Mandate amount ($ millions) Details 1,950 NJ will invest $1.7 billion in hedge funds and $250 million in funds of hedge funds by June, focusing on emergingmarkets managers and activist funds of hedge funds. PFA is eyeing investments in hedge funds for portable alpha and is looking at single-manager multistrategy funds. 110,000 NA ALLOCATIONS* Investor New York State Common Retirement Fund Orange County Employees Retirement System School Employees Retirement System of Ohio Assets ($ millions) $155,000 Mandate amount ($ millions) Details $275 The fund invested $200 million with Mariner Latitude International, a multistrategy fund, and $75 million with Mariner Caspian Select Credit International, an arbitrage fund. The plan has allocated $70 million to Schroder Investment Management North America. The system made allocations to Diamondback Capital Management, Endeavor Capital Management, Farallon Capital Management, Marathon Asset Management, Och-Ziff Capital Management and Taconic Capital Advisors. 8,000 11,690 70 300 * Ongoing searches for and recent allocations to hedge funds or funds of hedge funds by institutional investors, as reported by iisearches.com in January. 20 • INSTITUTIONAL INVESTOR’S ALPHA • FEBRUARY 2008 http://iisearches.com

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - February 2008

Institutional Investor's Alpha Magazine - February 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Alternative Perspective The Good Guys: A Simple Plan Cover Story: Energy and Commodities: Fueling Opportunity Regulation: Energy Trading: The Brawl on the Hill Interview: Master of Values Regulation: Hedge Fund Registration: Way Out West Research Center: Top Hedge Fund Analysts Alpha Bytes: Rocket Man Unhedged: Commentary: Structured for Success

Institutional Investor's Alpha Magazine - February 2008

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