Alts Gains Pace PaSERS’ 17% Return

Mar 21 2008 | 11:31am ET

The $35 billion Pennsylvania State Employees’ Retirement System gained 17.2% in 2007 on the strength of its allocations to private equity and portable alpha strategies.
On a macro level, PaSERS Chairman Nicholas Maiale said the 2007 performance, which amounts to $5.2 billion in earnings, placed the fund among the top 5% of all large public pension funds. Chief Investment Officer John Winchester reported that the fund’s top-performing asset class in 2007 was p.e., with a return of 41%. Other asset classes posting returns in excess of the total fund return, Winchester said, were inflation protection (including commodities), 31.4% and real estate, 22.6%.

Winchester also highlighted the performance of the fund’s domestic stocks asset class, which earned 9.5% versus a benchmark of 5.1%. The difference was almost entirely attributable to the fund’s portable alpha absolute return strategy, using a combination of swaps and funds of hedge funds, Winchester said.

“In all, the portable alpha absolute return strategy has generated $1.6 billion in earnings for the fund since inception in 2002,” he noted.

In other PaSERS p.e. news, the fund has committed up to $40 million to ABS Capital Partners VI, up to $50 million to Lime Rock Partners V, up to $50 million to Madison Dearborn Capital Partners VI and up to $15 million to Versa Capital Partners II, as follow-on investments.

All investments will be funded from cash.

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