PERAC Ups Hedge Fund Mandate Size For Mass. Pensions

Aug 16 2007 | 11:59am ET

The Public Employee Retirement Administration Commission, the oversight committee of the Massachusetts Public Pension Systems, has voted to allow all systems to invest up to 10% in hedge funds and absolute return strategies without its approval. The policy includes a proviso that any amount in excess of 5% is invested through the Pension Reserves Investment Trust Absolute Return Segment.

The commission said its recent decision reflected its willingness to continue to “level the playing field” for local systems relative to PRIT (which has a total of 10% allocated to hedge funds through a combination of its basic absolute return and “portable alpha” investments) as well as its recognition that investing in hedge funds through established, well-diversified funds of funds has so far been successful in achieving favorable positive returns with minimal exposure to any single hedge fund.

The move is unlikely to make the Massachusetts Secretary of the Commonwealth especially happy. William Galvin has railed against public pension funds investing in hedge funds, and is currently suing activist hedge fund manager Bulldog Investors. He has also demanded that collapsed Boston hedge fund Sowood Capital Management—which took $30 million in Massachusetts pension money down with it—explain its sudden losses.

At its regular meeting on July 25, the commission also voted to approve a request from the Andover Retirement Board to increase its allocation to the absolute return segment to 10% from the previous limit of 7.5%.

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