Alternatives briefs: Texas plans urged to invest in state infrastructure

AUSTIN, Texas — Two Texas state pension funds are being urged by state lawmakers to invest in the Transportation Finance Corp., an infrastructure fund focused solely on Texas-based projects.

Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Tom Craddick say the investments from the $108 billion Teacher Retirement System of Texas and $27 billion Employees Retirement System of Texas, both of Austin, could help offset state budget shortfalls in repairing the state's eroding infrastructure.

Mary Jane Wardlow, spokeswoman for the employee system, said executives have not seen any specific plan yet and therefore could not comment. Calls and e-mails to officials of the teachers system were not returned by press time.

Last year, officials of both pension funds said in testimony before the Texas Legislature that the idea of forgoing other investments to participate in the new fund could conflict with their mandate to provide the best return for their members.

NORMAN, Okla. — Benjamin C. Stewart, the first director of investments for the $639 million University of Oklahoma Foundation, Norman, is looking to boost alternatives at the fund.

Mr. Stewart, who was appointed Aug. 11, said in an e-mail that one of his first tasks will be to further diversify the foundation by increasing alternative investments while trimming public equity exposure. As of June 30, alternatives constituted 15% of total assets, while 41.6% was in domestic equity, 21.9% in fixed income and cash, and 21.5% in international equity.

Mr. Stewart previously was vice president and investment officer at the $278 million Baptist Foundation of Oklahoma, Oklahoma City, which is searching for a replacement, according to Janna Charles, executive assistant to the president at the Baptist Foundation.

ST. LOUIS — Metropolitan St. Louis Sewer District Employees' Pension Plan might search for managers to handle distressed debt or bank loan portfolios next year depending on the results of an asset allocation study scheduled for the fourth quarter, said Karl Tyminski, district secretary-treasurer.

Plan officials are considering adding hedge fund managers, as well as first-time allocations to private equity, portable alpha and infrastructure.

The fund's asset allocation as of June 30 was 19.8% core bonds, 18.3% U.S. large-cap stocks, 9.5% GTAA, 9.4% international stocks, 9% U.S. small-cap stocks, 8.6% global bonds, 5.9% market neutral, 5.4% real estate, 4.7% high-yield bonds, 4% absolute return, 3.1% emerging markets stocks and 2.3% cash.

NEPC was rehired Aug. 14 as investment consultant for both the $190 million defined benefit and the $30 million 457 plans. The firm was first hired in 2003.

An RFP was issued in March in accordance with the district's purchasing policies, which require contracts to be rebid every five years.

CHICAGO — Chicago Public School Teachers' Pension and Retirement Fund board on Aug. 21 heard presentations from hedge fund-of-fund managers BlackRock Alternative Advisors, Blackstone Alternative Asset Management and Mesirow Advanced Strategies.

Representatives of Harris Alternatives, Dorchester Capital Advisors, K2 Advisors and Pacific Alternative Asset Management, also all hedge fund-of-fund managers, gave presentations to trustees on July 17.

Trustees of the $12.1 billion fund expect to make decisions Sept. 16. They could hire one manager from each group of presentations and assign each $100 million to $150 million, said Kevin Huber, executive director.

Funding will come from equity portfolios; no managers will be terminated. Mercer, the fund's general consultant, is assisting.

PHILADELPHIA — Hedge fund manager Paul Eustace was ordered by the U.S. District Court in Philadelphia to return $279 million to investors he defrauded through four commodity pools, CFTC spokeswoman Dennis Holden said Aug. 19.

Mr. Eustace, who lives in Oakville, Ontario, also was ordered to pay $12 million in civil penalties, Mr. Holden said.

The Commodities Futures Trading Commission brought the case against Mr. Eustace in June 2005 after his asset management firm, Philadelphia Alternative Asset Management, collapsed.

The futures and options commodity fund sustained $200 million in losses, which Mr. Eustace tried to conceal through false account statements, the CFTC spokesman said.

The Aug. 13 court order also permanently barred PAAM from trading, required the firm to return $276 million to investors, minus what Mr. Eustace can pay and restitution already made. PAAM was also ordered to pay $8.8 million in civil penalties.