Connecticut Retirement Plans & Trust Funds, Hartford, made its first move into hedge funds, investing $100 million each with funds of funds Prisma Capital Partners and Rock Creek Group, M. Timothy Corbett, chief investment officer of the $24.5 billion Connecticut system, said in an interview.
“Last year, we identified five firms (in which) we wanted to invest $100 million each,” he said. The Prisma and Rock Creek contracts were completed last month, Mr. Corbett said.
Negotiations continue with the other three firms — Permal Group, Blackstone Group and K2 Advisors. Mr. Walsh gave no timetable for completing agreements with the firms, each of which also would receive $100 million.
Mr. Corbett said the initial funding for the hedge funds of funds will come from the system's emerging markets debt, domestic equity and developed markets international equity portfolios.
The commitments to hedge funds of funds is the first step in the system's effort to make alternative investments a greater part of the system's portfolio, he said. Eventually, the system wants alternatives to account for 8% of total assets, or about $2 billion based on the latest data.
The system created an alternative investment portfolio in which assets would be split evenly between hedge funds of funds and investments in real-return assets such as commodities and natural resources, Mr. Corbett said. The system hasn't made any investments in the latter group yet.
The system already has separate portfolios for Treasury inflation-protected securities, commercial real estate investments, emerging markets debt, high-yield bonds and private equity.
The Connecticut system consists of six state pension funds and eight state trust funds.