The board of the San Francisco City & County Employees’ Retirement System is expected to reject Chief Investment Officer William Coaker’s plan for a 15% allocation to hedge funds at a meeting in the next several weeks and instead limit hedge funds to no more than 5% of the portfolio, sources say.
The board had been scheduled to vote on the hedge fund allocation at a special meeting scheduled for Wednesday.
Board President Victor Makras said in an interview that a new special meeting will be held in the next few weeks. He said he will schedule the meeting as soon as he can poll members for a suitable date.
He said the Nov. 5 meeting was canceled because several board members were traveling out of the country.
The board is also expected, as part of the hedge fund vote, to bar or severely limit the use of leverage by hedge fund managers, a common tactic used by such mangers to increase returns.
Mr. Coaker’s plan would shift assets from fixed income and equities to create the new hedge fund allocation.
The vote against a major hedge fund allocation for the $20 billion plan, which currently has no hedge fund exposure, would come amid increasing scrutiny of hedge fund results and fees by institutional investors, propelled by September’s decision by the $293.7 billion California Public Employees’ Retirement System, Sacramento to sell off its $4 billion hedge fund portfolio.
Board members at the San Francisco pension plan for months have debated Mr. Coaker’s plan. The CIO, who took office in January, revealed to the board the following month that he was proposing a hedge fund allocation. Debate among board members over the riskiness, returns and high fees charged by hedge funds started immediately, even before Mr. Coaker presented a formal plan in May.