Assets invested in hedge funds and hedge funds of funds by defined benefit plans among the Top 200 largest U.S. retirement plan sponsors were up a whopping 55%, to $109.7 billion, in the year ended Sept. 30.
Direct investment in hedge funds was up 75.6% to $77.8 billion, while hedge fund-of-funds investments increased 20.8% to $31.9 billion, according to Pensions & Investments' survey of the largest U.S. retirement plan sponsors.
Part of the enormous growth in hedge fund assets in P&I's 2010 survey is the result of more complete reporting by 10 corporate and public pension funds. Those new plans added an aggregate $17.7 billion to P&I's hedge fund investor rankings over the previous survey period.
Three pension funds that were included in the previous year's ranking with a total of $794 million in hedge fund investments did not provide their hedge fund breakout for the current year.
Growth in hedge fund assets in the year ended Sept. 30 was a healthy 30% if assets of the funds new to the ranking and those that did not report assets were netted out.
By comparison, hedge fund assets of the 200 largest U.S. retirement sponsors were down 12.3% in the year ended Sept. 30, 2009, and were up only 5.6% in the year ended Sept. 30, 2008.
The actual size of hedge fund investment might have been higher in any given year because a portion of respondents to P&I's annual survey choose not to provide detailed asset breakouts.
The new 800-pound gorilla in P&I's hedge fund investor universe is the defined benefit plan of General Motors Co. As of Sept, 30, GM's pension fund invested $11.9 billion in hedge funds, with 97% invested directly in hedge funds and just 3% invested with external hedge fund-of-funds managers.
General Motors has not reported its hedge fund investments to P&I since Sept. 30, 2006, so year-to-year comparisons are not possible.
GM supplanted all other plan sponsors to take the top spot in P&I's ranking, with more than double the hedge fund assets of No. 2 hedge fund investor, the California Public Employees' Retirement System, Sacramento. CalPERS had $5.4 billion in hedge fund assets as of Sept. 30, 72% of which was in direct investments. CalPERS also held the No. 2 spot in the year-earlier ranking.
The system's hedge fund assets as of Sept. 30 fell 3.6% from the previous survey.
With $5.2 billion, all in direct hedge fund investments, the Public School Employees' Retirement System of Pennsylvania, Harrisburg, moved to the third position in the current ranking, up from fifth the prior year. PSERS' hedge fund assets increased 48.9% compared to the prior year.
Hedge fund assets of the Pennsylvania State Employees' Retirement System, Harrisburg, fell 24% to $4.4 billion, pushing the fund to fourth place from No. 1 a year earlier. About 98% of PennSERS' assets were invested in funds of funds.
Virginia Retirement System, Richmond, was the fifth in P&I's ranking, with $4.2 billion, all in direct hedge funds. VRS' hedge fund assets increased 24.1% in the year ended Sept. 30.
There also has been a gradual increase in hedge fund allocations over the past five years by large U.S. defined benefit plans.