Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
May 26, 2008 01:00 AM

South Carolina fund adopts strategic partnerships

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Robert L. Borden still will have the final decision in selection of money managers.

    COLUMBIA, S.C. — The South Carolina Retirement System Investment Commission is among the first pension plans to commit a significant portion of its assets — 19% — to a series of strategic investment partnerships with money managers.

    Commissioners of the Columbia-based fund hired four money managers on May 15 that will assume management of as much as $3.5 billion. The plan already had two such arrangements, worth $1 billion each, with Morgan Stanley Investment Management, New York.

    The new hires are part of a larger plan by Chief Investment Officer Robert L. Borden to ultimately give an elite group of managers more investment freedom to invest large mandates across a wide range of alternative investments.

    Mr. Borden is breaking new ground as he completes the transition of the fund he termed “woefully undiversified” into one on the cutting edge of asset allocation approaches. Until a November 2006 legislative change, the fund's investments were restricted to domestic stocks and bonds.

    One of Mr. Borden's innovations, for example, is to charge two of the strategic partners with creating a new wrinkle on private investments: Each manager will invest $1 billion destined for illiquid investments like private equity, real estate, infrastructure and co-investments temporarily in conservative, liquid hedge funds so the assets are fully invested until they are drawn down.

    At the May 15 meeting, the system's six commissioners hired the four managers to create what are most often termed strategic partnerships. JPMorgan Asset Management, New York, and Invesco Ltd., Atlanta, each will direct investment of global multiasset alternatives portfolios. JPAM will manage $1 billion; Invesco's mandate size has not been set. Mariner Investment Group LLC, Boston, and TCW Group, Los Angeles, each will manage $750 million in credit-oriented opportunities.

    Strategic partnership arrangements give the manager the ability to call many of the shots when it comes to asset class selection and portfolio construction (Pensions & Investments, May 12). But in South Carolina's case, investment manager selection ultimately remains in Mr. Borden's hands, although he is relying on a huge amount of input from the system's strategic partners and plan consultant Rhett Humphreys of NEPC LLC, Cambridge, Mass.

    As with other strategic partnerships — dating back to 1995 when GTE Corp. pioneered the concept for its defined benefit plan — South Carolina's partnerships boast a healthy dose of knowledge transfer to help the public fund's investment professionals keep abreast of changing market conditions, new investment strategies and technology innovations.

    Despite some similarities, strategic partnerships between pension funds and money managers are customized. South Carolina's new relationship with JPMorgan and a similar $1 billion mandate signed in March with Morgan Stanley Investment Management apparently are the first of their kind, sources said. Morgan Stanley already manages $1 billion in a strategic partnership that acts as a “completer” fund of funds for the commission's approximately $6 billion hedge fund portfolio.

    Mr. Borden said the two managers initially will invest the assets in “a strata of conservative, liquid hedge funds” that will be used to fund less liquid alternative asset classes like private equity, real estate and infrastructure as well as co-investment opportunities.

    The advantage of the model, Mr. Borden said, is that the strategic partner can avoid the J-curve effect common with private partnerships by keeping assets fully invested until they are needed and with investments in income-oriented private partnerships. The J-curve effect is the return cycle in private equity investments, with usually low or negative returns in early years because assets are invested in companies that take time to mature. South Carolina's hedge fund investment returns will help to offset the lack of investment income in the early years of the other investments.

    Morgan Stanley and JPMorgan Investment Management both have extensive investment management capabilities with both internally managed alterative investment strategies such as real estate, private equity and hedge funds as well as funds of funds. The managers will invest in both internally and externally managed strategies.

    'Real value'

    Strategic partnerships offer the South Carolina investment commission “real value on the investment side. They are very flexible and allow the manager to be very responsive to market conditions. Managers can make swift decisions about investment opportunities and take full advantage of opportunities when they come up,” Mr. Borden said.

    Giving a manager a large allocation also results in “very favorable economics,” although he declined to specify the price breaks the fund is getting.

    “We set up these partnerships with a real eye toward hiring managers with broad investment capabilities and lots of quantitative and qualitative talent, and then to let them manage so we get their best ideas. The pension and consulting communities still are intent on dividing investments into tiny boxes. The ultimate iteration of this tendency is to hire talented managers and then keep them in the tiny boxes,” Mr. Borden said.

    Mr. Borden said after 18 intense months of implementing a much more diverse asset allocation for the state retirement plan portfolio (P&I, Nov. 17, 2007), the commission is largely done “with most of the heavy lifting.”

    As part of the expansion of the alternative investment portfolio — which went from zero to 30% of assets under the new allocation — commissioners earlier this month hired Capital Guardian Trust Co., Los Angeles, to manage $500 million in emerging markets debt. The commission also invested $225 million in the WLR Absolute Return Hedge Strategy, managed by WL Ross & Co. LLC, New York.

    Commitments to private equity and hybrid alternative funds of $200 million each were made to the Selene Residential Mortgage Opportunity Fund, managed by Selene Investment Partners LLC, Uniondale, N.Y., and the Sankaty Credit Opportunities IV Fund, managed by Sankaty Advisors LLC, Boston. Another $100 million went to the D.E. Shaw Direct Capital Fund, managed by the D.E. Shaw Group, New York, and $50 million was invested with the Welsh, Carson, Anderson & Stowe Fund XI, managed by Welsh, Carson, Anderson & Stowe, New York.

    Contact Christine Williamson at [email protected]

    Reporter Jennifer Byrd contributed to this story.

    Related Articles
    South Carolina Retirement System may change allocations, hire director
    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Targeting millennials: Author, niece put his latest book to music
    Targeting millennials: Author, niece put his latest book to music
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    The Future of Infrastructure: Building a Better Tomorrow
    Fulcrum Issues: Equity Returns and Inflation — Choose Your Own Adventure
    What Matters Most in Considering a Private Debt Strategy
    Why pursue direct lending in the core middle market?
    Research for Institutional Money Management
    Are Factors a Thing of the Past?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing