By Svea Herbst-Bayliss
Tue Dec 6, 2011 12:47pm EST
Article from Reuters
(Reuters) - Massachusetts, already a big investor with hedge funds, hired 10 more managers on Tuesday as part of its push into direct investments with these types of portfolios.
Trustees for the $48 billion state pension fund picked a hometown hedge fund, some funds based in London and others from New York to jointly oversee $245 million.
Jonathan Jacobson's Boston-based Highfields Capital, William Ackman's New York-based Pershing Square Capital Management and Yan Huo's London-based Capula Investment Management are among the newcomers, who will be given $25 million each to invest.
The selection of this group comes less than two months after the pension fund announced its first foray into so-called direct investing and hired its first 11 individual managers. Those managers received $280 million to oversee.
Until now, Massachusetts, like many other state pension funds, has relied largely on funds of funds to help select hedge fund managers and oversee these types of investments. But at a time when industry returns are sagging, high fees -- both at the individual funds and at funds of funds -- are leaving a bad aftertaste and prompting state treasurers to reconsider.
Indeed, some industry experts speculate that pension funds' drive to cut costs may eventually prompt them to put money with traditional asset managers, who are building up their alternative investment capabilities, instead of selecting high-priced hedge fund managers.
A year ago, Massachusetts, which has a relatively new treasurer, Steven Grossman, began looking at direct hedge fund investments and signaled that it might stop using the handful of funds of funds that it has had money with for years.
For the calendar year 2011, the state's pension fund has returned 2.0 percent, with private equity investments and real estate investments providing the biggest lift. Hedge fund investments lost 2.18 percent for the state fund.
It has been a difficult year for some of the hedge fund industry's biggest names. Even some of those selected by Massachusetts were in the red some of the time this year.
Some of the funds the state selected on Tuesday have been favorites with pension funds for a while. Pershing Square manages money for New Jersey and New Mexico, while Capula was selected by Wisconsin when that state made its first-ever hedge fund allocation in February.
In addition to Highfields, Pershing Square and Capula, others receiving $25 million to manage are Brigade Capital, Davidson Kempner Capital Management, Indus Capital Partners, Samlyn Capital and Winton Capital Management.
Glenview Capital Management will oversee $15 million, and Ascend Capital will invest $30 million for the pension fund.
In October, Massachusetts sent $25 million to each of the following fund firms: Anchorage Capital Group, Arrowgrass Capital Partners, BlueCrest Capital Management BCCMS.UL, Brevan Howard Capital Management, Claren Road Asset Management, Elliott Management, Kingdon Capital Management, Och-Ziff Capital Management Group (OZM.N), Taconic Capital Advisors and York Capital Management. Viking Global Investors received $30 million.
(Reporting by Svea Herbst-Bayliss; editing by John Wallace)
Article from Reuters
