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CalPERS Increases Hedge Fund Allocation

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SACRAMENTO, Calif. (HedgeWorld.com)–Trustees of the California Public Employees’ Retirement System decided to move forward with an annual plan to increase the absolute return allocation to 2% to 4% of the US$138 billion pension fund, although it has yet to complete its initial 1% allocation to hedge funds.

Citing a U.S. economy that is slowly strengthening, CalPERS officials told trustees in their annual plan that no noticeable recovery is expected until 2004 and that only single-digit equity returns are anticipated for the foreseeable future. The current investment climate should favor “alpha” or “active return” strategies.

So far, the fund has authorized US$690 million to absolute return strategies including: Andor Technology Fund (US$50 million); Apex-Zaxis Partners LP (US$40 million); Atticus Global LP (US$40 million); Brookside Capital LP (US$75 million); EVA-Pentangle (US$40 million); Farallon Offshore (US$50 million); Landsdowne European Ltd. (US$25 million); Liberty Square Offshore (US$40 million); Tosca (US$50 million); Matador Capital Management (US$25 million); Tremblant Partners (US$35 million); Welch Entrepreneurial (US$25 million); and Symphony (US$50 million).

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The fund announced plans to reorganize its strategy earlier this year, creating a “spring-fed pool” of advisers to assist the US$138 billion pension fund in managing its hedge fund program, which will be called an absolute return strategies program .

Spokesman for the fund Brad Pacheco said that officials plan to implement the increased allocation over the course of the next year and beyond to get up to the final 2% to 4% allocation. The allocations, approved by the board on Monday, fall under the pension fund’s global equity allocation. For now the search for additional managers continues.

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