The Massachusetts Pension Reserve Investment Trust is sticking with funds of hedge funds and private equity, in spite of criticisms of both alternative asset classes.
Michael Travaglini, executive director of the $52 billion pension fund, says he is satisfied with funds of funds and is not prepared to build the infrastructure necessary to directly invest in single-manager funds.
“I’ll pay the double layer of fees,” Travaglini told the Reuters Hedge Fund and Private Equity Summit in New York. “If we tried to do it alone, we would have to pay a lot more in costs for lawyers and due diligence and even the experts on the staff who would have enough experience to select the funds. If I took that in-house, I’m not sure the hedge funds we would select would be different or better.”
Travaglini, who led the pension into its first hedge fund allocations when he joined it four years ago, added that he is pleased with the returns produced by the funds of funds he employs—Massachusetts’ hedge fund investments returned 11.9% last year—despite losses in the high-profile collapses of Amaranth Advisors and Sowood Capital Management.
“Even with the blow-ups, we’ve exceeded the performance expectations,” he said.
Travaglini also had kind words for private equity in spite of the parched credit markets, calling them “the only place where we can get a pop.”
“Even if returns aren’t what they were historically… we still think they’re attractive enough for us as a plan,” he said.
Massachusetts has a 10% allocation to p.e., although only 7% of its assets are currently in the asset class.