State pension shake-up

Date: Thursday, August 6, 2009
Author: Boston Hearld.com

In a major strategy shift, the state pension fund’s board opted yesterday to pull back from more than a quarter of its investments in hedge funds - just over $1 billion - and disburse them among national, international and emerging-market stocks.

The board voted to gradually decrease its investments in hedge funds to 8 percent of the fund’s total investments, down from 11 percent. In doing so, board members turned aside a staff recommendation to maintain that allocation at 11 percent.

The board opted to eliminate all of the fund’s so-called “portable alpha” hedge fund investments, citing concerns about their performance.

During a discussion on the fund’s investment in hedge funds, state Treasurer Tim Cahill, chairman of the pension board, said Massachusetts shouldn’t necessarily seek to emulate its peers’ investments.

“If we had had the money that we put in hedge funds in the stock market, we would have lost twice as much,” he said. “As other people are selling, we’re buying. This is not the time we want to look like everybody else.”

After a $100 million dip in June, the pension fund - called the Pension Reserves Investment Trust fund - rebounded in July, gaining $1.7 billion to finish the month at $39.4 billion, fund staff estimated yesterday. The fund, which pays for retiree pension benefits, peaked in fiscal 2008 above $54 billion.