AUSTIN, Texas (HedgeWorld.com)–The Teacher Retirement System of Texas has signed a contract with Tremont Advisers Inc.,* Rye, N.Y., as adviser for the pension fund’s hedge fund allocation.
Tremont will be focusing on two areas: strategy allocation and manager selection. The US$80 billion pension fund has a 1.5% allocation to strategically traded securities, an investment strategy that has been in place since 2000. So far the pension fund has made some direct hedge fund investments and is now asking Tremont to monitor those existing investments in addition to selecting new funds, said John Hock, executive vice president and head of global sales at Tremont.
To date the public pension fund has not taken an active role in the allocation that includes hedge fund strategies such as market neutral, event driven, long/short equity or fixed income.
This is the second pension fund allocation Tremont has gained in recent months. In May, the firm was hired by the YMCA Retirement Fund to manage US$50 million in funds of funds. Tremont is managing the strategy allocation and manager selection of the New York-based pension fund in part through tools developed by RiskMetrics and Tremont.
Pension funds are bound to become significant participants in the hedge fund industry and a growing part of Tremont’s business, according to Tremont officials. During the past year, Tremont like many other hedge funds of funds has focused its efforts on introducing its services to pension funds globally.
“People are tempering their appetites and educating themselves…We are probably one year to 18 months away from a good number of plans making formal commitments,” Mr. Hock said of the worldwide pension fund demand for hedge fund of funds.
He said that Tremont finds itself doing more basic hedge fund education than selling of hedge fund strategies so far. Many pension funds are seriously exploring funds of funds vehicles after a primer on the hedge fund industry.
“There are groups who are equipped to do that (due diligence), but I think that a majority of pension and endowment funds will come around to the fund of funds format because they are not sufficiently staffed,” he added.
*Tremont Advisers Inc., Rye, N.Y., is a minority investor in, and strategic partner with, HedgeWorld.