Michigan State Endowment Shifting $100M To Quantitative Hedge Funds

Dec 7 2016 | 12:16am ET

Michigan State University’s $2.35 billion endowment is slashing its allocation to four long/short hedge funds by $100 million and parking the money with computer-driven quantitative vehicles. 

The school’s portfolio lost 4.3% in its last fiscal year, according to an article in Bloomberg, and was down 2.4% through June 30 led by a 9% drop in its hedge fund portfolio. The performance has prompted CIO Philip Zecher to explore ways to diversify the fund’s strategy and style selections.

Approximately $50 million will be redeployed to a fund run by Jim Simons’ Renaissance Technologies as part of the style shift, the article said, while the remaining $50 million will be allocated to other to-be-determined quantitative funds in the near future.

As part of the shift, redemptions will be (or have been) made from Mick McGuire's activist hedge fund Marcato Capital Management, Alan Fournier’s Pennant Capital Management, David Gallo’s Valinor Management and Wingspan Investment Management. 

Wingspan, founded by former Goldman Sachs executive Buck Ratchford, announced late last week it would close and return investor capital. MSU’s decision to redeem from Wingspan preceded the fund’s decision to liquidate, according to Bloomberg.  

The endowment’s hedge fund allocation has fallen from 29% to 25% over the past year. Rounding out the top three segments, 19% of the fund is in U.S. stocks, with 17% devoted in private investments, the article said. 

Zecher, who became the school’s first CIO in December of last year, has a doctorate in nuclear physics and is a Michigan State alum. He was formerly partner and chief risk officer at Stamford, CT-based currency hedge fund EQA Partners, which closed in 2012, and co-founded Investor Analytics LLC in New York in 1999.

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