Institutional investors have earmarked allocations to minority- and women-owned money management firms handling traditional strategies for well over a decade, but their focus on adding hedge funds to their emerging manager programs is comparatively recent.
High-profile pension funds that have been building minority- and women-owned hedge fund portfolios, often as an extension or subset of equally new emerging manager investment programs, include New York City Retirement Systems, with a combined $163.4 billion from five pension funds.
Three of the New York City pension funds invested an aggregate $350 million directly in three minority- and women-owned hedge funds, including Standard General LP, said Scott Evans, chief investment officer, in an e-mail forwarded by Eric Sumberg, a spokesman for Scott M. Stringer, New York City comptroller and fiduciary for the pension funds. Mr. Sumberg said he couldn't disclose the size of the three mandates or the identity of the two other hedge funds as of press time.
The $132 billion Teacher Retirement System of Texas, Austin, so far has committed a total of $2 billion to 138 emerging manager strategies and co-investments, said Juliana Fernandez Helton, a TRS spokeswoman, in an e-mailed response to questions.
Investments in hedge funds managed by emerging managers totaled $166 million as of Sept. 30, about 8% of the program's assets. Emerging minority- and women-owned and disabled-owned firms manage $142 million or 85% of the hedge fund suballocation, dominating the space.
Because of the high number of emerging hedge fund managers, the TRS investment team meets annually. Ms. Helton said a hybrid structure “between the traditional fund-of-funds (model) and a 100% internally managed portfolio” is used. Hedge funds-of-funds manager The Rock Creek Group LP provides staff with due diligence, portfolio allocation and monitoring support, but internal investment staff retains full discretion over hedge fund manager hires and terminations.
By comparison, Texas Teachers had an additional $11.8 billion in its more traditional, dedicated hedge fund portfolios as of Sept. 30, about 9% of total plan assets.
A more common practice among new women- and minority-owned hedge fund investors is the selection of hedge funds-of-funds firms to construct and run their portfolios.
The $178.3 billion New York State Common Retirement Fund, Albany, for example, hired funds-of-funds manager Pine Street Alternative Asset Management LP a year ago to manage a $200 million program. Pine Street recently divided $100 million between two women- and minority-owned hedge funds, said Matthew Sweeney, a spokesman for New York State Comptroller Thomas P. DiNapoli, who is the sole trustee of the pension fund.
The $29.4 billion Connecticut Retirement Plans & Trust Funds, Hartford, on the other hand, designated $175 million for the emerging and women- and minority-owned hedge fund portion of the Connecticut Horizon Fund last winter. To date, $85 million each has been delegated to hedge funds-of-funds managers Morgan Stanley Alternative Investment Partners and Appomattox Advisory Inc., said David S. Barrett, a spokesman for Connecticut Treasurer, Denise L. Nappier, who is the sole trustee of the pension fund, in an e-mail. n
