Milwaukee Employes' Retirement System authorized a search for a manager to run $50 million to $100 million in an active extension strategy, said Bernard J. “Jerry” Allen, executive director of the $4.6 billion pension fund.
Callan Associates, the pension fund's investment consultant, will select four to six managers as candidates for the allocation, Mr. Allen said.
Any managers that meet the search criteria that include having more than $1 billion in assets under management, may apply for inclusion in the search by completing a questionnaire on Callan's website, Mr. Allen said.
For the allocation, the pension fund is considering absolute-return strategies, such as long/short or market-neutral equity; global tactical asset allocation; and other low-beta strategies, Mr. Allen said.
“We are trying to capture as much of the hedge fund non-covariance with equities without having to pay the 2% and 20% fee” for management and profit sharing, or without allocating to hedge funds, Mr. Allen said. “We've been advised from Callan we can capture 80% of the hedge fund (advantage) without paying the fee.”
The pension fund is not considering hedge funds for the allocation.
Callan plans to present the short list sometime in the first quarter of the new year.
The search represents the initial phase of the implementation of the pension fund's 5% allocation to hedge funds and absolute-return strategies, which was approved last spring in a move that included reductions in equity and fixed income to fund the new allocation.