Texas has given its teachers' pension plan the freedom to invest up to 10% of its assets in hedge funds.
The state Legislature passed and Gov. Rick Perry signed last month the law giving the Teacher Retirement System of Texas the new authority. The $108 billion system had lobbied for the change, saying that the added flexibility could have helped it avoid more than $30 billion in losses during the financial crisis.
Prior to the new legislation, TRS was authorized to invest no more than 5% of its assets in hedge funds.
The law "puts another tool in the chest" of TRS' managers, state Rep. John Otto, one of its sponsors, told the Financial Times.
"I think there is a place for hedge funds if they are used properly and not used as a leveraging risk, as opposed to a leveraging against risk."