The New York City Retirement Systems is two-thirds of the way toward completing investment of a $3.5 billion hedge fund portfolio on behalf of three of the city's five pension plans.
Once the remaining $1.2 billion is invested directly in single-strategy hedge funds — likely by the end of this year — the four-person hedge fund investment team in New York City Comptroller John C. Liu's office will tackle dismantling the $450 million in a commingled hedge fund of funds managed by New York-based Permal Group and reinvesting that money directly in hedge fund strategies.
“From the start, our plan has been to have direct investments in between 15 and 20 hedge funds. Permal Group has known from the outset that we would move out of its hedge fund of funds,” Seema R. Hingorani, director of public equities and hedge funds in the comptroller's office, said in an interview.
Another destination for part of the Permal assets might be an emerging manager hedge fund of funds, Ms. Hingorani said.
“We really want to support emerging hedge fund managers, but it may be easier given the size of our staff to use a niche hedge fund of funds,” she said. No time frame has been set for a search.
The comptroller's Bureau of Asset Management invests the $127.5 billion in aggregate assets of the five New York City pension funds at the direction of each fund's board of trustees.
It has taken eight years to reach this point. Investment staffers began educating trustees of each of the city's pension plans about hedge funds in January 2005, according to Pensions & Investments' archives.
It wasn't until mid-2008 that trustees authorized hedge fund allocations and searches for funds-of-funds managers for the $43.1 billion New York City Employees' Retirement System, the $26.8 billion New York City Police Pension Fund and the $8.5 billion New York City Fire Department Pension Fund.
The first hedge fund investments by the three funds didn't happen until March 2011, however, when Permal Group was awarded $250 million from NYCERS, $150 million from the policemen's fund and $50 million from the firefighters' fund. Permal was funded in July 2011, according to a transaction report provided by the comptroller's office.
NYCERS' hedge fund allocation now is 4% while the police and fire funds both have a 5% allocation, said Ms. Hingorani. All three boards have retained discretion over investment in individual hedge funds and must approve staff recommendations.
Trustees of the $45.8 billion Teachers' Retirement System of the City of New York and the $3.2 billion New York City Board of Education Retirement System have not authorized hedge fund investments.