Earlier in the week, perhaps reflecting on the fact that 90% of hedge fund managers are overpaid [4], California Public Employers Retirement System (CalPERS) announced it would cut its entire exposure to hedge funds [5]. It seems the decision is becoming more popular, as Bloomberg reports [6], the Teacher Retirement System of Texas, the sixth-largest U.S. public pension, has decided to cut its hedge fund allocation by 1 percentage point to only 8% of the fund. The decision enables the fund to reduce equity exposure and raise fixed income exposure.
Texas will reduce hedge funds to 8 percent of the pension from 9 percent, according to board documents.
The board of the $126 billion Texas system approved the change today following an asset allocation study, Howard Goldman, a spokesman, said by e-mail.
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Besides reducing its bet on hedge funds, the Texas pension lowered the portion of assets it gives to equities by 4 percentage points and to fixed-income securities by 2 percentage points, while adding 5 percentage points each to risk parity and private markets, according to board documents. Risk parity is a strategy for investing based on allocation of risk and private equity and real assets.
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Texas Teachers’ has an unfunded liability of about $28.9 billion, meaning it has 80.8 percent of the assets needed to fund future payments to retirees.
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Hardly surprising, as we noted previously...
Performance has not been great...
[7]
as Hedge funds have become nothing but beta...
[8]
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But perhaps the most notable fact from the Texas pension fund's statement is its great rotation from stocks to bonds...
