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Massachusetts Water plan pulls plug on EnTrustPermal fixed-income hedge fund

Tobin Bridge near Chelsea, Mass.
Tobin Bridge near Chelsea, Mass.

Massachusetts Water Resource Authority Employees' Retirement System, Chelsea, approved redeeming its shares in the Permal Fixed Income Holdings Institutional Fund, confirmed Carolyn Russo, executive director of the $460 million retirement system.

The system began investing in the hedge fund of funds in September 2011. As of Dec. 31, the pension fund's investment in the fund was valued at $11.3 million.

Ms. Russo explained in an email that the decision to terminate the EnTrustPermal fund was both the result of the recommendation of the system's investment consultant, NEPC, and also the board's consideration of whether asset classes with traditionally higher fees, and which are perceived to be higher risk, are justifiable or appropriate for the system, given its nearly 100% funded status.

The retirement board is in the process of assessing and updating the plan's asset allocation, as well as contemplating a reduction in assumed actuarial rate of investment return. As of year-end 2015, the assumed rate of return was 7.75%, data on the plan's website show.

A spokesman for EnTrustPermal could not be immediately reached for comment by press time.