ALBANY, N.Y. — Executives at the $164 billion New York Common Retirement Fund are considering a major shift in the fund's $5.7 billion hedge fund portfolio to direct investment from funds of funds.
Sources said investment staffers at the Albany-based plan are looking to flip the hedge fund allocation to 80% direct investment and 20% in hedge fund of funds, the opposite of the current allocation.
Sources, who asked for anonymity, said Peter Carey, senior investment officer, absolute-return strategies, who oversees a New York-based staff working on hedge fund investments, has been spearheading a top-to-bottom review of the hedge fund portfolio for some months. Mr. Carey assumed oversight of hedge fund investments in the third quarter of last year.
Sources said Mr. Carey talked to staff at other large public pension plans — including the $237.3 billion California Public Employees Retirement System, Sacramento — about their hedge fund arrangements. They said New York Common's proposed allocation is remarkably close to CalPERS'.
Mr. Carey was not available for an interview. Fund spokesman Robert Whalen would not comment about specifics other than to stress that plan officials are still reviewing possible changes to the hedge fund portfolio.
“Funds of funds have worked as expected and provided value to our absolute-return strategy program. We are pleased with their performance and with the hedge fund managers they have selected. Funds of funds will continue to have a role in our program going forward,” Mr. Whalen wrote in an e-mail response to questions.
But sources said Mr. Carey has begun to dismantle some of the fund's hedge fund-of-funds portfolio, which includes separate accounts managed by seven firms.
The fund reported in its most recent annual report that as of March 31, 2007, its hedge fund-of-funds managers were Coast Asset Management LLC; Permal Management; Mezzacappa Management LLC; Olympia Group of Cos.; Hunt Financial Ventures LP; Guggenheim Advisors LLC; and Consulting Services Group LLC. CSG, Memphis, Tenn., also is the plan's alternatives consultant.
It isn't clear which of the hedge fund-of-funds managers have been asked to reduce or terminate their portfolios, sources said.
Mr. Whalen declined to comment on the terminations or on the amount each managed for the fund. But according to press reports and one manager, Coast managed about $550 million; Permal, $675 million; Mezzacappa, $465 million; Olympia, $1 billion; Hunt Financial, $115 million; and CSG, $935 million.