Texas County & District Retirement System, Austin, continues to reduce the number of hedge funds, but not the size of its $6.2 billion hedge fund portfolio.
It will redeem a total of $760 million from five hedge funds in the portfolio, Paul J. Williams, chief investment officer, told trustees of the $25.6 billion fund during a board meeting Thursday. The assets will be reallocated among the 23 remaining hedge funds in the portfolio, he said.
York Capital Management will be terminated for performance of its $223 million allocation, Mr. Williams said. The York Capital fund was down a net 4.9% for the year ended Sept. 30, compared to a 6.2% gain for the HFRI Event Driven index and 4% for the HFRI Merger Arbitrage index, the benchmarks for the pension fund's $1.5 billion event-driven portfolio.
York Capital declined to comment, a spokesman said.
As part of manager consolidation within the hedge fund portfolio, TCDRS also will redeem from two funds in its $1.8 billion long/short equity portfolio: Archipelago Partners, with $233 million, managed by Wellington Alternative Investments in a hedge fund of funds; and Ascend Partners Fund II, with $6 million, managed by Ascend Capital.
About $211 million will be redeemed from Brevan Howard Asset Management's flagship fund from within the plan's $1.1 billion global macro portfolio.
Asia-focused multistrategy manager LIM Advisors will receive a redemption request for $87 million from the LIM Asia Multi-Strategy Fund. The pension fund's multistrategy portfolio totaled $427 million as of Sept. 30.
Among other action concerning the hedge fund portfolio, Mr. Williams told the board that TCDRS' hedge fund team will keep a close eye on Emerging Sovereign Group's long/short equity offering, EMG Cross Border Equity Fund, due to performance concerns. Returns of the $180 million investment in the fund as of Sept. 30 were down 6.4% year-to-date and down 4% over one year. Returns of the HFRI Equity Hedge index, the benchmark for the long/short portfolio, for the same periods were down 4.2% and down 6%, respectively.
Also, the board was advised that the fund's consultant, Cliffwater, had reviewed Och-Ziff Capital Management Group's September settlement with U.S. federal authorities relating to bribery charges in Africa, and determined that the alternative investment manager's investment operations are not affected.
Kathleen K. Barchik, senior managing director at Cliffwater, recommended that TCDRS maintain its total investment of $759 million in one Och-Ziff hedge fund and three long-only opportunistic credit funds. Mr. Williams said investment staffers will “keep a close eye” on the firm.
