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ALTERNATIVES

PennSERS to replace hedge fund category with multistrategy asset class

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Pennsylvania State Employees' Retirement System, Harrisburg, at its board meeting Wednesday moved to replace its hedge fund asset class with a multistrategy asset class that will provide for more diversified investment opportunities, said Pamela Hile, spokeswoman for the $26 billion pension fund, in an email.

The multistrategy asset class will include opportunistic credit-driven strategies, non-traditional opportunistic fixed income, distressed credit, distressed equity, hedge funds and other equity strategies that don't fit cleanly into PennSERS' other asset classes but present unique opportunities, Ms. Hile said.

Ms. Hile said it's too early to know whether there'd be any manager changes as a result of the new asset class.

The target allocation for the new multistrategy asset class is 12% of the total pension fund. As of Dec. 31, the hedge fund allocation was about 7.7%.

The board moved $534 million of non-traditional fixed-income portfolios to this new multistrategy asset class.

“The composite (of the new asset class) may contain illiquid investments but in aggregate will be more liquid than our private equity or private real estate investments,” Ms. Hile said.

The board also invested an additional $400 million from cash in two index funds managed by Mellon Capital Management: $250 million in an MSCI World ex-U.S. index fund within global public equity and $150 million in a Bloomberg Barclays U.S. Aggregate Bond index. PennSERS had $2.6 billion invested in the equity index fund and $428 million in Mellon's bond index strategy.