Colorado Fire & Police Pension Association, Greenwood Village, hired K2 Advisors to manage $100 million in a commodities-focused hedge fund of funds, confirmed J. Scott Simon, chief investment officer of the $3.3 billion system.
The commodities investment is the third and final component of the fund’s absolute-return or hedge fund program, Mr. Simon said in an interview. The association’s board of trustees last year raised the system’s overall hedge fund allocation to 11% after reducing it to zero from about 5% in 2009.
Earlier this year, the system gave $100 million each to hedge fund-of-funds managers GAM and Aetos to manage in global macro and long/short equity strategies, respectively, Mr. Simon said.
The commodities fund introduces a measure of volatility into the hedge fund portfolio, but like global macro, offers returns that are uncorrelated to equities. Aetos’ long/short equity strategy, by contrast, offers a lower volatility, low beta exposure.
“The commodities fund of funds will help balance the other two absolute-return approaches,” Mr. Simon said, noting that the annual return target for the hedge fund allocation is cash plus 4%.