Kentucky Retirement Systems, Frankfort, invested $100 million in five hedge funds, said T.J. Carlson, chief investment officer.
It is the $14.6 billion pension fund's first direct investments in hedge funds. It invested $20 million each in:
- Soroban Capital Partners Fund, long/short equity;
- Senator Global Opportunity Fund, event-driven value managed by Senator Investment Group;
- Knighthead Domestic Fund, distressed credit managed by Knighthead Capital Management;
- HBK Fund II, multistrategy market-neutral managed by HBK Capital Management; and
- MKP Opportunity Fund, global macro managed by MKP Capital Management.
Funding is coming from the pension fund's $1.4 billion hedge funds-of-funds assets. Mr. Carlson said the goal is to hire another 15 managers over the next 18 months and to have $600 million to $800 million each in direct investments and funds of funds. He added that the pension fund wanted a diversified allocation for its first round of investments and “as we add more managers, we will become more discretionary and look for more unique investment strategies.”
Absolute-return consultant Albourne Partners assisted.
Separately, the pension fund returned 11.03% for the fiscal year ended June 30, 18 basis points shy of its custom benchmark. The underperformance was attributed to high benchmarks for the private equity and real-return portfolios. Public equity returned 18.3%, followed by absolute return, 12.3%; real estate, 12%; private equity, 11.1%; fixed income, 3.1%; and real return, -0.6%.
Private equity and real return were 800 basis points and 540 basis points, respectively, below their custom benchmarks. Equity was 130 basis points over its custom benchmark; absolute return, 410 over; fixed income, 290 over; and real estate was about even.