Rhode Island Redeems $585M From 8 Hedge Funds

The Rhode Island State Investment Commission has voted to completely redeem its capital from seven hedge funds and lower exposure to one more by 50%, the latest example of public pension funds asking for their money back as hedge funds come under unprecedented scrutiny.

The New England state will redeem a total of $534 million from the seven funds it is completely exiting, as follows:

• Ascend Capital - $69.2 million
• Brevan Howard - $75.7 million
• Brigade Capital Management -$59.7 million
• Emerging Sovereign Group - $41.1 million
• Och-Ziff Capital Management - $103.3 million
• Partner Fund Management - $79 million
• Samlyn Capital - $106 million

The state has also trimmed its investment with Viking Global by 50%, redeeming a further $51 million to bring the total redemptions to $585 million. 

Rhode Island’s investment commission, chaired by state Treasurer Seth Magaziner, manages approximately $7.7 billion in pension assets for the Rhode Island Employees Retirement System. The redemptions, which should be completed by the end of this year, follow a decision in late September to lower its allocations to hedge funds from 15% to 6.5% as part of a “Back to Basics” strategy implemented by Magaziner. The new strategy aims to place the bulk of the pension’s assets in low-fee index funds and other traditional investments, Magaziner said at the time. 

New York and New Jersey have announced similar moves this year as weak fund performance – especially in the first half of 2016 – and high fees grated on pension managers. 

2016 is on track to see the first annual net outflow from the hedge fund industry since the financial crisis in 2009, according to eVestment, as some $29.2 billion was pulled out of the sector in just the third quarter. 

Rhode Island is not abandoning all hedge funds, however. Davidson Kempner Capital Management, Elliott Associates, Capula Investment Management, DE Shaw, Graham Capital Management and Winton Capital Management are among the managers that survived the culling, according to a spokesman for the Commission. 

So far this year, the Rhode Island pension fund has returned 6.20%, beating its benchmark by 43 basis points, the spokesman added.