Texas School Fund Mulls Fee-Saving Overhaul Of Hedge Portfolio

Jan 27 2012 | 11:19am ET

The Texas Permanent School Fund is fed up with fund of hedge funds fees.

The $25 billion endowment's already modest return from its $2.42 billion in hedge fund investments were eliminated by fees—leaving the fund with a loss. While the Texas Permanent fund invests just 16% of its assets in absolute-return and private equity funds, those funds account for a whopping 68% of its costs.

"The sector that should have enhanced our funding for schools actually detracted from it," Holland Timmins, chief investment officer, said. "We had a positive return in the asset class, modestly, but it got eaten alive by the fees."

Holland proposed at a State Education Board meeting on Wednesday hiring more in-house managers—possibly as many as 30 new employees—and getting rid of at least one of the five funds of funds to which it currently allocates.

One of the other five—Blackstone Alternative Asset Management, GAM Holding, Grosvenor Capital Management, K2 Adivsors and Mesirow Advanced Strategies—would be chosen to advise the Texas fund on allocating to hedge funds, Timmins said.

While the proposals are designed exclusively to save the fund money, a member of the its investment committee said of the funds of funds, "They will still be making plenty of money."


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR