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, he 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.