"While the core U.S. economy and employment remains strong, the 2020 outlook reflects positive but tempered expectations as a result of rising geopolitical risks and increasing conflict in the Middle East, continuation of trade tariff negotiations and the uncertainty of the U.S. (presidential) election," said Kenneth J. Heinz, president of Chicago-based HFR, in a news release accompanying the firm's year-end hedge fund performance report.
While the total invested in hedge funds and hedge funds of funds in 2019 was lower than the prior year, several pension funds continued to build out or reconfigure their hedge fund portfolios.
The investors with the largest allocations to hedge funds in 2019 from P&I's universe were:
- The $27.2 billion City & County of San Francisco Employees' Retirement System invested a total of $1.13 billion with six hedge fund managers as pension fund officers continue to grow the allocation to its full 15% target.
- Florida State Board of Administration, Tallahassee, invested a total of $875 million in six hedge funds and one hedge fund of funds during 2019. The board oversees investment of $205.8 billion, of which $165.4 billion is for the Florida Retirement System.
- Maryland State Retirement & Pension System, Baltimore, invested an aggregate $850 million with five hedge funds from the $54.1 billion pension fund.
Some public pension funds also are busy hiring hedge fund managers to build their new crisis-risk offset portfolios.
The $18 billion State Universities Retirement System of Illinois, Champaign, allocated a total of $345 million to four systematic trend-following managers, the first hires for its new crisis-risk offset portfolio.
SURS has a long-term target allocation of 20% to the crisis risk offset portfolio, according to the system's 2020 investment plan. SURS did not respond to requests for additional information.
The $16.8 billion Orange County Employees Retirement System, Santa Ana, Calif., invested $150 million with a managed futures firm as an addition to the trend-following portion of its $1.7 billion risk-mitigation portfolio.
The system also invested $150 million in a systematic trend-following manager outside the risk mitigation portfolio.