Kentucky Retirement Systems, Frankfort, will decide in February what to do with the $100 million that will be returned later this quarter when hedge fund manager Arrowhawk Capital Partners closes.
T.J. Carlson, chief investment officer of the $13.4 billion pension system, said in an interview that trustees at their Feb. 7 meeting may earmark the money from Arrowhawk's Durable Alpha fund for direct investment in another hedge fund.
The pension fund intends to move into direct hedge fund investment over the next five to seven years by gradually reducing the mandates of its hedge funds-of-funds managers to about 50% or 60% of the 10% target hedge fund allocation, Mr. Carlson said.
However, if trustees opt to reinvest the Arrowhawk proceeds directly in another hedge fund, investment staff likely will take up to six months to develop a more specific plan for moving assets gradually from hedge funds of funds with the assistance of the system's consultant, R.V. Kuhns & Associates.
Mr. Carlson said advice on direct investment in hedge funds also will be sought from the fund's three existing funds-of-funds managers — Blackstone Alternative Asset Management, Pacific Alternative Asset Management and Prisma Capital Partners. In August, the pension system awarded $400 million to each manager.