Institutional Investor's Alpha Magazine - October 2007 - (Page 20)

Pension Corner the average hedge fund was down 1.31 percent, according to Chicago-based Hedge Fund Research, Georgetown’s hedge fund portfolio was up 50 basis points. Kochard believes a well-rounded view of finance is essential to fund management. In addition to the 20 percent of the university’s endowment that is in hedge funds, he has allocated 20 percent to U.S. public equity, 20 percent to non-U.S. equity, 16 percent to private equity, 7 percent to investment-grade fixed income, 3 percent to noninvestment-grade fixed income and 14 percent to real assets. Kochard has long kept one foot in the classroom and the other in investing. Before joining Georgetown, he was managing director of the Virginia Retirement System — the pension fund for the state’s public employees — and taught part time at the University of Virginia’s McIntire School of Commerce. Although Kochard believes there are benefits to dual roles in teaching and investing, he is quick to note that investing in hedge funds is complicated. “It is a difficult space, and if you don’t have someone really watching the portfolio, you may have trouble,” he says. “You can’t just passively put money into a fund of hedge funds and expect to do as well as Yale — it won’t work.” Orange County Employees Retirement System O SEARCHES* Investor Marin County Employees’ Retirement Association range County, California, is known for its theme parks, wealthy beachfront communities and eponymous orange groves. It’s also known for racking up the biggest loss for a local government investment pool. In 1994, Orange County lost $1.6 billion on MANDATES With hedge fund returns rebounding since the troubles that plagued the sector over the summer, some endowments and pension funds have been increasing their alternative allocations. Below are some examples of plans that have recently moved into hedge funds. Assets Mandate amount ($ millions) ($ millions) Details $ 150 NA The plan is considering market-neutral managers to increase diversiﬁcation and may introduce a portable-alpha component to its international equity exposure. Callan Associates is consulting. As part of a change to its portable-alpha program, the pension plan is looking to add five to seven direct hedge fund managers by year-end. R.V. Kuhns & Associates is consulting. The council’s superannuation fund is looking double its high-alpha equity allocation to 34 percent by next year, which it will fund by reducing its traditional equity exposure. New Mexico Public Employees Retirement Association 13,400 $600 Rhondda Cynon Taf County to Borough Council (U.K.) 2,600 NA ALLOCATIONS* Investor Colorado Fire & Police Pension Association Assets Mandate amount ($ millions) ($ millions) Details $ 3,500 $ 30 The association’s board approved a $30 million allocation to Gottex Fund Management’s Market Neutral Fund. Pension Consulting Alliance advised. The pension plan allocated a total $22.5 million to the following managers: Archery Capital, Deutsche Asset Management, Hatteras Investment Partners, Société Générale Asset Management and Union Bancaire Privée. Morgan Stanley’s investment consulting services group assisted. City of New Orleans Employees’ Retirement System 410 22.5 *Ongoing searches for and recent allocations to hedge funds or funds of hedge funds by institutional investors, as reported by iisearches.com in September. a leveraged bet by treasurer Robert Citron that interest rates would fall or remain low. They didn’t, and the county was forced to ﬁle for bankruptcy. Since emerging from bankruptcy in June 1996, the county has been understandably risk-averse. But surprisingly, when the $7.6 billion Santa Ana–based Orange County Employees Retirement System decided to move into hedge funds a few years ago, the plan chose a direct investment in a single-manager fund. Now, as it looks to increase its hedge fund exposure, Ocers — which provides retirement, death and disability benefits to the county’s employees — is playing it safe and turning to funds of hedge funds as part of an effort to beef up returns without increasing risk. Following a recommendation from its adviser, San Francisco–based Callan Associates, and a yearlong debate over whether to increase the plan’s hedge fund diversity and then whether to go with single-manager funds or funds of hedge funds, Ocers’ board in mid-July raised its hedge fund allocation from 5 percent to 7 percent, a $152 million increase. “We are in the process of conducting a search for a fund-of-hedge-funds manager,” says Lorelei Chao, Ocers’ assistant investment ofﬁcer. “We will be targeting a more conservative strategy with lower return objectives and lower expected volatility.” The new allocation, which is being ﬁnanced by reducing the plan’s international bond exposure to 8 percent from 10 percent, is an effort to supplement the portfolio’s existing hedge fund exposure. Ocers currently has roughly 4 percent of its portfolio in Westport, Connecticut–based Bridgewater Associates’ Bridgewater Pure Alpha fund, a global macro portfolio managed for the plan. The fund invests in equities, fixed income, commodities and currencies, and returned 3.07 percent for the 12 months ended June 30, 2007. Ocers’ ﬁve-year annualized return is 11.25 percent, as of June 30. Comparatively, the average annualized fiveyear return for public funds with assets greater than $1 billion is 11.47 percent, as measured by Wilshire Associates’ Trust Universe Comparison Service. — C.O. 20 • INSTITUTIONAL INVESTOR’S ALPHA • OCTOBER 2007 http://iisearches.com

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2007

Institutional Investor's Alpha Magazine - October 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Applied Knowledge The Good Guys: Autism Advocate Interview: Nerves of Steel Cover Story: Ivy League Education Alpha Awards: Top Service Providers: Trying Times Strategies: Passage to India Profile: The Oracle of Irvine Alpha Bytes: Futurama Research Center: Funds of Funds 50 Unhedged: Commentary: Crisis? What Crisis?

Institutional Investor's Alpha Magazine - October 2007

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