Alameda County Dips Into Alternatives

May 2 2008 | 9:48am ET

Another public pension is taking the plunge into the world of private equity and hedge funds. The $5.6 billion Alameda County (Calif.) Employees Retirement Association in March approved a new allocation to private equity and alternative investments to the tune of 10% of its portfolio.

According to minutes from its March board meeting, the new allocation will be funded by reducing the pension’s domestic equity component to 37% from 41%, as well as cutting fixed-income to 24% from 28% and real estate to 6% from 9%.

The system will also increase its international equity allocation from 22% to 23%.

The system’s consultant, Strategic Investment Solutions, and its staff in February concluded that the inclusion of private equity and alternatives to its portfolio “is a superior scenario to increase expected return” to “46 [basis points] above the current portfolio expected return of 8.33% and 103 bps of additional risk above the current portfolio expected risk of 11.37%.”

Oakland-based ACERA’s investments are managed by Betty Tse, who began her stint at the plan as an investment analyst in 1999 and became ACERA’s first chief investment officer in 2002. Previously, the plan’s investment department was managed by the CEO.

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