CalPERS terminated its relationship with hedge fund of funds manager Financial Risk Management because the two couldn't agree on contract terms, said a source with knowledge of the deal. FRM was one of three hedge fund of funds managers selected by the $167 billion California Public Employees' Retirement System last September to assist in finding direct hedge fund managers for its then-$1 billion hedge fund allocation. The Sacramento, Calif.-based system also selected Pacific Alternative Asset Management and UBS O'Connor. CalPERS staff said in September that they intend to raise the hedge fund target to between 2% and 4% of total assets, from less than 1%. Kurt Silverstein, CalPERS' manager of hedge fund investments, and Brad Pacheco, manager of media relations, did not return calls seeking confirmation; Ann Popkin, a senior vice president at FRM, also did not return a call for comment.