Indiana Public Retirement System, Indianapolis, terminated GMO, which ran $132.3 million in an absolute-return strategy for the $23.5 billion system, according to an investment board report.
“In our continuous effort to mitigate the overall fund's correlation to equity markets, it is our desire to minimize directional bets in the hedge fund portfolio,” the report said. “Approximately 70% of the monies in … GMO account were invested in underlying mutual funds that did not attempt to hedge against any broad market movements. As a consequence, GMO returns exhibited a high degree of correlation with the S&P 500 and Russell 3000 indices over the last three years, 0.86 and 0.84, respectively.
“In order to enhance the absolute-return portfolio's effectiveness as a diversifying component of the aggregate fund, we thought it was prudent to completely withdraw our allocation to this manager,” the report said.
Information wasn't available on where the money was moved or how the GMO assets were allocated across the pension funds the system oversees. Jeff Hutson, the system's chief communication officer, didn't respond to a request for comment from system officials.
Tucker Hewes, GMO spokesman, said the firm's officials declined to comment.
The system oversees the $15 billion Indiana Public Employees' Retirement Fund, $8.4 billion Indiana State Teachers' Retirement Fund and five other state pension funds, whose combined value totals $79.3 million.