Denver Employees Retirement Plan expects to conduct a shortlist search for a hedge fund-of-funds manager to run $85 million, said Steve Hutt, executive director of the $1.7 billion plan.
Consultant Summit Strategies will assist.
“We’re looking for an emphasis on more conservative strategies under the hedge fund umbrella,” he said.
He said the plan aims to hire the hedge fund-of-funds manager by the end of the second quarter.
Funding will come from the terminations of core fixed-income managers Neuberger Berman and Loomis Sayles, which ran $77 million each, and NCM Capital Management, which ran $31 million. The remaining $100 million will be moved to a passive core bond portfolio run by Northern Trust, raising it to about $200 million.
“The reason for the terminations is not for performance, but to make space in the portfolio for the hedge fund allocation,” he said.
Mr. Hutt said the plan will cut its core fixed-income allocation by 4.5 percentage points to 17% to make room for the new 5% hedge fund-of-funds allocation. The remaining 0.5 percentage points will come from rebalancing the overall portfolio, Mr. Hutt said.
The plan’s target allocation is 27% U.S. large-cap equities, 17% core fixed income, 15% international large-cap equities, 8% each real estate and alternatives, 6% U.S. small-cap equities, 5% each high-yield fixed income and absolute return, 4% international small-cap equities, 3.5% emerging markets equities, and 1.5% TIPS.