HARTFORD, Conn. -- The State of Connecticut Retirement & Trust Funds wants ultimately to cut between $500 million and $600 million, or 12.5% to 15%, from the state's $3.5 billion in unfunded private equity investments.
But first it is concentrating on reducing by nearly 50% the alternative investments commitments made in the fourth quarter by the previous administration.
At a meeting with the state's Investment Advisory Council last week, State Treasurer Denise Lynn Nappier noted she is in final discussions with several of the general partners about getting them to voluntarily pare commitments made by her predecessor Paul J. Silvester.
"We are achieving varying levels of success with these voluntary measures," the treasurer said.
Mr. Silvester, before leaving office, made new commitments totaling $852.2 million with 12 managers.
In addition, the $18.5 billion system has decided to:
* Put a moratorium on starting any new partnerships until it has made significant reductions or seen appreciable capital returns on current investments.
* Consider, as a fallback strategy if the cutback negotiations aren't successful, the merits of liquidating the system's interest in certain investments.
* Initiate a request for proposals for a consultant for alternative investments to help it establish procedures for due diligence review and manager selection as well as to monitor the performance of those funds.
* Review opportunities for participating on investor committees of each fund.
Since taking office in January, the new treasurer has, at the request of the state's Investment Advisory Council, been reviewing the alternative investments made by her predecessor. The council had expressed concern about the high level of commitments made by Mr. Silvester in the fourth quarter.
Ms. Nappier said that as of Dec. 31, commitments stood at 19% of the fund, while funded commitments totaled around 6.6% of the pension fund.
The institutional quality and track record of the new investments "run the gamut," according to Ms. Nappier. "On the one hand there are some highly recognized general partners with the expertise and experience that demonstrate the capability to carry out their stated investment strategy.
"On the other hand, first-time fund commitments were also made where there is very little, if any, track record and where the risk profiles are greater than other partnership holdings."
Voluntary reductions were requested only for uncommitted capital.
Harry Alverson, managing director at Carlyle Asia Partners, Washington -- hired by the state in the fourth quarter -- said officials at the Connecticut system "may have made an inquiry about reductions, but I don't think we're being asked to release them from their commitment."
"Every new management team wants to put their own stamp on asset allocation . . .we've always taken the view that if investors want out, we will try to come up with a solution to keep everyone good friends."
Officials at all of the other partnerships in which Connecticut made fourth-quarter investments declined comment.
