Kentucky Retirement Systems starts process to divest from hedge funds

The investment committee of Kentucky Retirement Systems, Frankfort, decided to eliminate hedge funds from the state retirement plans and health insurance funds it manages during a special meeting Oct. 14.

The decision was the result of the KRS board's plan to simplify investments, add liquidity and cut fees, said David L. Eager, interim executive director.

At the meeting, David Peden, KRS' chief investment officer, presented the committee with a draft plan to eliminate the combined $1.5 billion hedge fund investments in the retirement and insurance pools by the end of 2019, Mr. Eager said.

Mr. Peden and Neil Ramsey, an investment committee member, currently are hammering out the details of the divestment and will present a final proposal to the investment committee Nov. 2. If approved, the full board will be asked to accept the committee's recommendation on Dec. 1, Mr. Eager said.

KKR Prisma is the only remaining hedge funds-of-funds manager in the combined portfolio; Mr. Eager said KRS investment staff has been shifting the portfolio over to direct investments. The portfolio currently includes 16 hedge fund strategies managed by firms such as Davidson Kempner Capital Management, Glenview Capital Management, JANA Partners, Magnetar Capital, Pine River Capital Management and Scopia Capital Management, according to the retirement system's June 30 holdings report.

The $11 billion aggregate pension portfolio has $1.1 billion invested in hedge funds and the $4 billion health insurance portfolio has $435 million.