The board of the Kentucky Retirement Systems, Frankfort, approved Thursday the investment committee’s recommendation to redeem $800 million of its total $1.5 billion hedge fund investments by July 2019, said David Peden, chief investment officer.
The redemptions were approved by the investment committee earlier this month as part of its plan to simplify investments, improve liquidity and transparency, and cut fees across the KRS portfolio.
To reach the $800 million, 12 direct hedge fund investments will be eliminated and hedge fund-of-funds manager KKR Prisma’s allocation will be reduced by roughly $300 million from the previous $700 million.
Redemption notices will be issued starting in January.
Long/short equity, equity market-natural and event-driven hedge funds are among the strategies targeted for redemption by 2019.
To reach the $800 million, 12 direct investments are recommended for termination: Anchorage Capital Group (credit), Knighthead Capital Management’s Domestic Fund (credit), Scopia PX (equity market-neutral), Tourbillon Capital Partners’ Global Master Fund (long/short equity), Luxor Capital Group’s Luxor Capital Partners (event-driven), Senator Investment Group’s Global Opportunity Fund (event-driven), Finisterre Capital’s Global Opportunity Fund (macro), DSAM Partners’ DSAM+ (long/short equity), Glenview Capital Management (long/short equity), JANA Partners Qualified (event-driven), Pine River Capital Management’s Pine River Fund (multistrategy) and LibreMax Capital’s LibreMax Partners (fixed-income arbitrage). Each strategy has close to $20 million invested. KRS is also still winding down its investments with hedge funds-of-funds managers Blackstone Group and Pacific Alternative Asset Management Co.
Direct and underlying hedge fund strategies that are not eliminated by July 2019 are expected get a more thorough look to see whether they should be retained, Mr. Peden said.
Where the redeemed assets will go is still being discussed. Mr. Peden noted that KRS is still awaiting the results of a performance and best practices review by PFM Group, which is expected to address investments at KRS and the state’s other retirement funds. The analysis could be released in January. Redemption proceeds could be received starting in April.
KRS administers a roughly $11 billion portfolio of pension fund assets and a $4 billion portfolio of health insurance assets. Both are invested in hedge funds.