The article says that public pension plans are lifting hedge fund investment, and seeking to boost long-term returns despite losses suffered in some funds in the financial crisis.
"There has been some deserved criticism of hedge funds, but many hedge funds during the market downturn in 2008 did better than the S&P 500", said Dan Slack, the chief executive of the system. While pensions have been investing in private equity and what are called alternative investments for many years, hedge funds have represented a smaller part of their portfolio. The average hedge fund allocation among public pensions has increased to 6.8% this year, from 6.5% for 2010 and 3.6% in 2007, according to data-tracker, Preqin.
The number of public pension plans investing in hedge funds has leapt 50% since 2007 to about 300, according to Preqin. State pension systems had $63 billion invested in hedge funds as of their fiscal 2010, and are expected to invest another $20 billion in hedge funds in the next two years, according to a recent report by consultant, Cliffwater. While hedge funds outperformed stocks in the financial crisis as an industry, some individual funds suffered significant losses or closed.
It is a "first step into hedge funds", said Larry Schloss, the New York City chief investment officer. He says he hopes the investment will help the city's pension system avoid the "wild ride" it has taken in recent years. The system had $115 billion before the market tumble in 2008, when it fell to $77 billion.
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© Wall Street Journal
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