Chicago Public School Teachers drops K2, Mesirow hedge funds of funds
By Barry B. Burr | November 27, 2012 4:08 pm
Chicago Public School Teachers' Pension and Retirement Fund will terminate hedge fund of fund managers K2 Advisors and Mesirow Advanced Strategies, redeeming a combined $149.2 million, Carmen Heredia-Lopez, director of investments, said in an e-mail.
K2 Advisors managed $74.2 million while Mesirow ran $75 million in its Mesirow Absolute Return Fund.
The terminations could lead to the $9.7 billion pension fund exiting hedge funds entirely because of a need for liquidity to pay benefits. Pluscios Management, which manages $25.3 million in a hedge fund of funds, will be the pension fund's lone hedge fund manager.
The board has set no time frame on making a decision on Pluscios, Ms. Heredia-Lopez said in the e-mail. It “has a different liquidity profile,” Kevin Huber, executive director, said in an separate e-mail last week.
The teachers' fund initially approved a 5% allocation to hedge fund of funds but it was never fully implemented because of the board's concern with “illiquidity of the asset class, high fees, and the lack of transparency,” according to a board report, citing analysis by investment consultant Callan Associates. In addition, the report noted the 1.8% allocation before the terminations “has little impact on the total risk and return profile of the CTPF portfolio.”
Information on where the pension fund will move the assets was unavailable from Ms. Heredia-Lopez.
Separately, the pension fund's board committed $25 million to Fortress Japan Opportunity Fund II, a real estate fund managed by Fortress Investment Group, Ms. Heredia-Lopez said in the e-mail. The board previously invested $22.5 million in Fortress Japan Opportunity Fund I.
Townsend Group, the fund's real estate consultant, assisted.