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

Pension Corner funds for the retirees. Travaglini says he understands such skepticism but believes that critics such as Galvin have often been guilty of “overreaching.” After the failure of Sowood, PRIT held discussions with Arden to determine the lessons the ﬁrm had learned and what internal steps it had since taken from a risk management perspective. The plan also wanted to ensure that Arden wouldn’t unnecessarily reduce exposure to any single fund as part of a knee-jerk reaction to Sowood. When it comes to management of a fund of PRIT’s size, says Travaglini, investors need to keep things in perspective — which means not getting caught up in shortterm aberrations. “When someone asks about a particular part of our portfolio, we’re happy to talk about it,” he says. “At the same time, we remind them that it’s the bigger picture that’s really important.” Public Employees Retirement Association of New Mexico fter years of ﬁghting New Mexico’s state legislature for the right to invest in hedge funds, the $13.7 billion Public Employees Retirement Association of New Mexico is ﬁnding that the battle was well worth it. Having successfully weathered this summer’s choppy market with help from its hedge fund investments, PERA is not only stepping up its allocation, it is initiating a portable-alpha program to further beef up returns. In late August, PERA’s advisory board approved a plan to create a portable-alpha program separate from the hedge fund allocation, which currently totals close to 3 percent of its portfolio ($375 million). Pension plans im- A MANDATES As troubles within the subprime mortgage market persist and uncertainty about the market looms, endowments and pension plans are continuing their push into hedge funds. Below are a few examples of plans that have recently begun searches for or made allocations to hedge funds. SEARCHES* Investor Hamburger Pensionskasse Assets Mandate amount ($ millions) ($ millions) Details $5,300 $145 The German multiemployer deﬁned beneﬁts program is in the early stages of bringing two new managers on board by early 2008. The U.K. pension plan seeks to appoint two more hedge fund managers, for mandates of £50 million ($104 million) each. The plan is considering an investment in hedge funds, pending approval from its investment committee next year. John Lewis Partnership Pension Trust Lincolnshire County Council Pension Fund 4,175 104 2,504 NA ALLOCATIONS* Investor E.On Energie Assets Mandate amount ($ millions) ($ millions) Details $7,131 NA The energy company’s deﬁned beneﬁt plan is making its maiden hedge fund investment. The endowment made a 10 percent allocation to a direct manager program administered by Cambridge Associates. Florida State University Foundation 450 $45 * Ongoing searches for and recent allocations to hedge funds or funds of hedge funds by institutional investors, as reported by iisearches.com in October. plement portable alpha by using hedge funds to generate alpha, or excess returns, and then transferring to a different asset class, whose returns are created using futures. The initial target allocation for PERA’s portable-alpha program is 5 percent of the portfolio’s total assets. PERA plans to make direct investments in 18 to 20 multistrategy or event-driven single-manager hedge funds with low exposure to traditional equity and more than $1 billion under management. After 12 to 18 months, PERA will look at increasing its portable-alpha allocation to 10 percent. “The goal of the new program is to generate higher alpha than we’ve been getting in the past two to three years from traditional equity managers,” says Robert Gish, PERA’s chief investment ofﬁcer. Gish was among a group of individuals who successfully negotiated a change to New Mexico law in 2005 that for the ﬁrst time allowed the state to invest in alternative assets. Since then PERA has made direct investments in roughly 20 single-manager hedge funds, many of which will be considered for the new portable-alpha program. PERA’s portable alpha program is already off to a quick start. In the past few months, the plan has allocated $35 million each to Canyon Capital Advisors’ Value Realization Fund and Marathon Asset Management’s Special Opportunities Fund. Recent direct investments include hedge funds managed by Stark Investments, AG Superfund and TPGAxon Partners. Though the plan had a rough-and-tumble summer that resulted in portfolio losses of roughly $300 million between June 30 and August 31, Gish says the hit was attributable almost entirely to declines in stock and bond prices. Since then the portfolio has not only recovered its losses but has also gained an additional $400 million. As of the end of its ﬁscal year, on June 30, PERA had a five-year annualized return of 11.68 percent, compared with 11.47 percent for public funds with assets of more than $1 billion, as measured by Wilshire Associates’ Trust Universe Comparison Service. In addition to implementing its new portable-alpha program, PERA has also been stepping up its direct hedge fund investments, says Gish. In May the plan invested $32 million in York Capital Management class-C shares and $25 million in Glenview Institutional Partners, followed in July by an additional $35 million direct hedge fund allocation to Mariner Investment Group. — Christopher O’Leary 20 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2007 http://iisearches.com

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

Institutional Investor's Alpha Magazine - November 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Patriot State The Good Guys: College Connection Interview: Currency of Change Cover Story: Comeback Kid Strategies: Masters of Art Research Center: Alpha Awards: Top Technology Providers Top Analysts Alpha Bytes: Critical Choice Unhedged: Commentary: Banking on a Bubble

Institutional Investor's Alpha Magazine - November 2007

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