Arizona Public Safety Personnel Retirement System, Phoenix, committed a total of up to $170 million to three funds, confirmed James Hacking, administrator of the $6.1 billion system.
The board committed up to $70 million to the OZ Master Fund, managed by multistrategy hedge fund manager Och-Ziff Capital Management Group. Mr. Hacking said Och-Ziff invests in five different strategies: merger arbitrage; long-short equity special situations; credit; convertible/derivative arbitrage; and select private investments.
“They have an incredibly impressive track record relative to the equity markets,” Mr. Hacking said, adding that the Och-Ziff strategy is inversely correlated with equity markets, which will provide downside protection.
The board also approved a $40 million commitment to H/2 Capital Partners Master Fund. The investment will go toward discretionary event-driven real estate opportunities, Mr. Hacking said.
Funding for the two hedge fund investments will come from equities and rebalancing, Mr. Hacking said.
The board, at its September meeting, also approved a commitment of up to $60 million to the Capital Guardian Emerging Markets Fixed Income Fund, run by Capital Guardian Trust.
Mr. Hacking said funding will come from the system's $1.2 billion fixed-income allocation, as part of a restructuring of the portfolio.
“We are moving about $500 million into a non-U.S. fixed income exposure,” he said, noting about $200 million of that strategy will be invested in emerging markets debt.
As reported earlier, the system committed up to $70 million to the Franklin Templeton Emerging Markets Debt Opportunities Fund in August, and Mr. Hacking said the system will be conducting a shortlist search for one or two more investments for the remaining $70 million.
He said that of the remaining $300 million in non-U.S. fixed income, about $200 million will go toward international developed market sovereign debt exposure and about $100 million will go toward non-U.S. credit opportunities exposure. He expects the general consultant NEPC to assist with shortlist searches.