Boeing Co., Chicago, plans to search early next year for direct hedge funds to invest almost $1.7 billion, said Andrew Ward, chief investment officer.
The searches will begin after officials at the $43.6 billion defined benefit plan determine the structure of the program, including whether to use separate accounts or commingled direct hedge funds, Mr. Ward said.
Boeing retained Albourne Partners Ltd. as a specialty consultant to assist with the hedge fund study and implementation along with general consultant Russell Investments, Mr. Ward said.
The plan now has 3% invested in hedge funds; Mr. Ward said officials want to reach the fund's 7% overall target.
“Today we currently have almost exclusively a hedge fund-of-funds program,” Mr. Ward said. “We plan to complement those external fund-of-fund relationships with a direct hedge-fund program internally over the course of the next three years.
“If we get there sooner, I don't think we'd be disappointed with that. But we plan to be pretty methodical and systematic in the way we implement it.”
Boeing plans to do the hedge fund searches on a “parallel path” to an asset-liability study expected to start soon and be completed by the middle of next year, Mr. Ward said.
Officials also expect to invest $1.5 billion in real estate over the next three to five years. “We are about 3.5% of our target 7%,” Mr. Ward said.
“Obviously, with real estate being a challenged asset class over the last year, that has helped us out, being underallocated to real estate.”
Plan executives also are considering investing in commodities, a new asset class for the fund. “With inflation risk being on the forefront of some folks' minds, we want to make sure we have available to us investments that we think would behave favorably in a high inflationary environment,” Mr. Ward said.
“We would envision our 2010 review to include more tweaks around the edges than a complete overhaul” of Boeing's current investment allocation and strategy, adopted in 2006, he said.
The fund's overall current target allocation is 45% fixed income, 28% global equities and 27% alternatives.