NEW YORK - In one of the biggest hedge fund moves by a pension fund, the $2.6 billion RJR Nabisco Inc. pension fund, New York, hired six hedge fund managers.
Sources said RJR will assign each manager $5 million, for $30 million in total. The move is the fund's first to hedge funds.
John W. MacMurray, vice president-pension and benefit investments, said the firms hired were: Grosvenor Capital Management, Glenwood Partners and Harris Associates, all of Chicago; Paloma Partners, Greenwich, Conn.; Blackstone Group, New York; and Ivy Management, Garden City, N.Y.
The managers run funds of funds, investing in other hedge funds.
Mr. MacMurray wouldn't comment further.
Among tax-exempt investors, far more endowments than pension funds invest in hedge funds.
"Endowments are much farther ahead than pension funds, especially in the area of alternative investments," said Arthur Williams III, president, Pine Grove Associates Inc., Summit, N.J., a consultant to pension funds, endowments and other investors on alternative investment strategies. Mr. Williams also launched his own hedge fund this summer.
Some sources outside the pension fund said Mr. Williams assisted RJR Nabisco in its new hedge fund allocation and hirings, although he declined to comment on whether he advised RJR Nabisco and declined to discuss the six managers the pension fund hired.
He said his clients have invested $1 billion in hedge funds, market neutral, arbitrage and other alternative strategies.
He said hedge funds are attractive because of the general outlook that "stocks and bonds, which performed so well in the 1980s, won't do so well in the years to come."
He said hedge funds have more latitude to make money in all kinds of markets, including the ability to sell short, allowing them to profit when markets are bad, something traditional money managers can't typically do. In addition, he said they can move to markets around the world for better opportunities.
But this broader mandate, which purports to give hedge funds an investment advantage, also serves to detract some interest because it requires more due diligence of pension executives than do separate account managers.
At Glenwood, one of the managers RJR Nabisco hired, Ronald J. Surz, vice president, said, "My guess is RJR is trying to get something besides six of the same thing."
He described Glenwood's strategy as conservative.
"We've never lost money over any six-month period," Mr. Surz said.
"We've had only three losing quarters, including first quarter 1994," when Glenwood's hedge fund was down 1.7%, mainly because of an investment in Askin Capital Management's well-publicized hedge fund loss of this year. Mr. Surz said Glenwood had invested less than 1% of its assets with Askin.
Typically, Glenwood, which has $250 million under management, invests with some 50 managers, using diversification to mitigate risk.
Mr. Surz said Glenwood has a preference for investing with experienced managers who are starting new ventures, such as when they leave a major hedge fund or alternative investment firm.
The other hedge fund managers hired by RJR Nabisco either couldn't be reached or declined to comment.