(updated with correction)
Texas Permanent School Fund, Austin, selected Grosvenor Capital Management and Blackstone Alternative Asset Management for absolute return strategic partnerships, following approval Friday from the State Board of Education.
The strategic partnerships are part of a restructuring move of the $2.4 billion hedge fund portfolio by the $24 billion fund.
The action did not include terminating the fund's other three current hedge fund of funds managers — K2 Advisors, GAM USA and Mesirow Advanced Strategies. Termination of the three managers was approved by the finance committee on April 18, but the fund's legal counsel ruled that proper notice of the terminations was not posted in time for a vote by the board.
Grosvenor currently manages $770 million and Blackstone, $637 million.
The partnerships were approved after a long debate among board members, who had concerns about why due diligence was not performed on more than the current lineup of five hedge funds-of-funds managers and why two managers were selected instead of one, which would have resulted in greater cost savings, according to a webcast of the board of education meeting.
Rhett Humphreys, a partner at NEPC and consultant to the fund, told the board the firm was neutral on recommending the fund enter into strategic partnerships, but that it concurred with the recommendation to select Grosvenor and Blackstone. He added he would have recommended due diligence on more managers, but it was not inappropriate to limit it to the five managers.