Alpha - September 2007 - (Page 20)

Pension Corner California–based Wilshire Associates’ Trust Universe Comparison Service (TUCS). Beyond hedge funds, Morrell has bolstered Wake Forest’s returns through a special $106 million tactical fund, strategically rotating assets among mutual funds managed by Fidelity Investments. Morrell and his three-person staff are constantly ﬁne-tuning the endowment’s risk in any given sector, and the tactical fund helps them do it. Launched in 2000 with $1 million in initial financing, the fund posted an impressive ﬁscal June 2007 return of 26.87 percent. As with most universities, at Wake Forest the investment committee sets the allocation guidelines. Still, Morrell and his team are given signiﬁcant leeway on investment decisions. The committee currently suggests allocating 15 percent to 22 percent of the assets to alternatives, giving Morrell the freedom to mix nontraditional investments into other portions of the portfolio. “We move money around in all asset categories, depending on what we think is overvalued or undervalued,” Morrell explains. “It’s not market timing. We don’t run in and out of the market into cash, but we’re looking for relative opportunities — depending on individual circumstances.” Henry J. Kaiser Family Foundation B ruce Madding is taking a cosmopolitan approach to investing for the Henry J. Kaiser Family Foundation. The $600 million foundation currently has 40 percent of its assets in hedge funds. Roughly 15 percent of its managers invest outside the U.S. “We think international hedge funds are where the MANDATES As the meltdown of the subprime mortgage sector created overall market uncertainty and investor panic this summer, hedge fund allocations among pension plans and endowments all but ground to a halt. Below are examples of some of the few allocations and searches that took place in July and August. SEARCHES* Investor Korea Life Insurance Association Milwaukee Employees' Retirement System Assets Mandate amount ($ millions) ($ millions) Details $45,000 $400 Korea Life Insurance is looking to invest $400 million in international hedge funds by year-end. The pension plan is considering a foray into hedge funds. Mercer Investment Consulting is advising. The plan is hoping to take advantage of the market downturn to opportunistically invest in hedge funds. Summit Strategies Group is assisting with its search. 5,100 NA Missouri Highway and 1,800 Transportation Employees' and Highway Patrol Retirement System 40 ALLOCATIONS* Investor Iowa Public Employees' Retirement System Assets Mandate amount ($ millions) ($ millions) Details $21,000 $400 The pension plan allocated $400 million to Mellon Capital Management Corp. Wilshire Associates served as the plan’s consultant. The endowment increased its allocations to Arden Asset Management and Mesirow Financial Advanced Strategies by $1.5 million each. RogersCasey advised. VRS invested in an international hedge fund managed by ValueAct Capital Partners. Louisiana State University 340 3 Virginia Retirement System 56,000 250 * Ongoing searches for and recent allocations to hedge funds or funds of hedge funds by institutional investors, as reported by iisearches.com in July and August. growth rates are,” says Madding, CFO of the Menlo Park, California–based nonprofit foundation, which provides nonpartisan information on health care topics through its research and communications programs. Hedge funds have been part of Kaiser’s investment strategy since 1984, when the foundation made its first allocation of $16 million in $2 million increments. Madding has been aggressively expanding the portfolio’s hedge fund exposure since joining Kaiser in 1989 from New York–based accounting firm Price Waterhouse. Aided by his two-person staff, Madding makes all of the foundation’s investment decisions, reviewing proposals from roughly 400 fund managers a year and interviewing about a dozen. Kaiser’s portfolio now includes direct investments in 11 funds — all of which are generalist and employ absolute-return or long-short strategies. Having stuck with his commitment to hedge funds through multiple recessions and market hiccups over the years, Madding is not particularly concerned about the impact of recent volatility on hedge funds. “We’ve been around the block,” he says. “We’ve been challenged in the past, but we still believe our managers have the skills — based on their experience and focus — to take advantage of opportunities.” The Kaiser Foundation returned 16.4 percent in 2006, compared with an average return of 13.57 percent for comparable nonproﬁt funds during the same period, according to Wilshire Associates’ TUCS. Through July it was up roughly 8 percent, having weathered the initial fallout from the subprime mortgage sector’s meltdown. In addition to hedge funds, Kaiser has allocated 40 percent of its portfolio to private equity and real estate, with the remaining 20 percent in equities. Many of the investments are international. Madding says he is considering putting money with a Chinese private equity manager, as well as making additional private equity investments in countries like Vietnam. This past summer he traveled to Spain to interview prospective managers, followed by a more recent trip to India to check out possible infrastructure investments. — C.O. 20 • INSTITUTIONAL INVESTOR’S ALPHA • SEPTEMBER 2007 http://iisearches.com

Table of Contents Feed for the Digital Edition of Alpha - September 2007

Contents Letter from the Editor Longs & Shorts Pension Corner: Keeping the Faith The Good Guys: Going Public Interview: Barry Bausano - A Delicate Balance Cover Story: Cruel, Cruel Summer Profile: Phil Cooper - Alternative Flight Plan Strategies: Marshall Wace - TOPS in Its Field Profile: Fortis Investments - Banking on Alternatives Research Center: Top Equity Trading Firms Alpha Bytes: Desktop Duel Unhedged: Commentary - The Taxman Cometh

Alpha - September 2007

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