Texas Permanent to develop process for picking hedge fund strategic partners

Texas Permanent School Fund, Austin, will review a process for selecting strategic partners for its $2.5 billion hedge fund portfolio during the Jan. 25-27 meeting of the Texas State Board of Education, which oversees the $22.8 billion fund on behalf of the Texas Education Agency.

Patricia Hardy, chairwoman of the committee on school finance/permanent school fund, told the board during a meeting on Friday that committee members had directed Holland Timmins, the permanent fund's executive administrator and chief investment officer, and his staff to bring a selection process proposal to the committee in January.

According to a webcast of the board meeting, Ms. Hardy said the permanent fund's finance committee likely will make recommendations for strategic hedge fund partners to the state board of education's April 18-20 meeting.

During the finance committee's Wednesday meeting, Mr. Timmins suggested that some of the PSF's five existing hedge fund-of-funds managers could be moved into strategic relationships, but in her report to the full board on Friday, Ms. Hardy did not specify whether the selection process would be limited to existing managers or conducted via an open RFP process.

PSF's five existing hedge fund-of-funds managers are Grosvenor Capital Management, which manages $770 million; Blackstone Alternative Asset Management, $637 million; K2 Advisors, $380 million; GAM USA, $328 million; and Mesirow Advanced Strategies, $317 million, according to an e-mail from Suzanne Marchman, a spokeswoman for the Texas Education Agency.

Separately, the full board approved two investment recommendations of the PSF finance committee: a search that will begin in January for a long-only or long/short commodities manager to run up to 3% of total fund assets or about $685 million in current dollars, and commitments of up to $75 million to TA Associates Realty Fund X, a value-oriented fund, and up to $50 million to Oaktree Real Estate Opportunities Fund V, an opportunistic fund.