Chicago Teachers May Dump Hedge Funds

Nov 20 2012 | 12:41pm ET

Chicago's teachers have almost $175 million invested in hedge funds—and they apparently do not like what they see.

The $9.7 billion Chicago Public School Teachers' Pension and Retirement Fund may quit the asset class entirely, Pensions & Investments reports. citing liquidity concerns. The pension's two largest hedge fund managers, K2 Advisors and Mesirow Advanced Strategies, are most in danger of getting the chop.

The two firms, who were recently terminated by the Texas Permanent School Fund, will have a chance today to save their mandates through presentations to the board. The teachers' third hedge fund manager, Pluscious Management, "has a different liquidity profile and therefore is not presenting tomorrow," executive director Kevin Huber told P&I. Still, the pension has not made a decision on whether to fire that firm, as well.

K2 and Mesirow each manage about $75 million for the pension. Pluscious has $25.3 million.

Huber said the pension moved to dump hedge funds "in order to assist with cash needs," specifically, the pension's need to pay benefits.

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