The Indiana State Teachers' Retirement Fund, Indianapolis, rejected investing in hedge funds and instead will explore investments in similar strategies, including global tactical asset allocation and market neutral, said Robert D. Newland, CIO. Trustees, who had originally considered a $170 million hedge fund allocation, chose not to go forward because of concerns over lack of transparency, high fees and understanding investment strategies, Mr. Newland said.
"We aren't going to approach hedge funds the way the industry standard is, through fund of funds or direct investing with hedge fund firms," he said.
Trustees will look at hedge-fundlike strategies offered by the $6.6 billion fund's existing managers: Alliance Capital and Barclays Global Investors, which both offer global TAA, and Franklin Portfolio, which offers a market-neutral domestic equity strategy, he said. Trustees might also look at other managers that don't manage money for the fund. No timeframe has been set for a decision; funding for any such investment would come from reducing equity index funds, Mr. Newland said. Callan is assisting.
Alliance manages $1.2 billion in core-plus fixed income and $564 million in an EAFE index fund for the plan; Barclays manages $775 million in an S&P 500 index fund and $480 million in a Russell 3000 index fund; and Franklin manages $173 million in active domestic midcap core equities.