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CalPERS Ready to Up Ante in Hedge Funds

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SACRAMENTO, Calif. (–Raising its hedge fund stakes, the California Public Employees’ Retirement System is launching the second round of its emerging manager program with the inclusion of funds of hedge funds managers.

As part of CalPERS’ Manager Development Program II, the pension fund’s investment committee decided to include funds of hedge funds alongside long-only investments. The emerging manager program lets a pool of advisors allocate assets to specific funds and then negotiate an additional equity stake in the underlying management firm.

Firms selected to participate as advisers are: Strategic Investment Management, Arlington, Va.; Progress Colchester Ventures LLC, San Francisco; The Rock Creek Group, Washington, D.C.; Bear Stearns Asset Management, New York; and Legato Capital Management, San Francisco.

Each adviser brings a different level of expertise that may enhance the US$196 billion pension fund’s expanding hedge fund program, which slated to eventually total US$2 billion. For example Strategic Investment Management is a specialist in the incubation and structuring of deals with emerging managers, as seen in its previous participation in the funds Manager Development Program I.

Progress also participated in the initial manager development program, having less success in manager analysis and deal selection, but officials decided to keep the firm in the new investment program, according to officials.

Rock Creek Group has private equity expertise stemming from its negotiation of its buyout from its parent firm The Carlyle Group. The firm also is a well-known fund of hedge funds manager and has earned hedge fund mandates from other public pension funds in Illinois and Virginia.

Bear Stearns Asset Management brings its own portfolio analytics and risk measurement tool–Bear Measurisk. According to Bear officials, the CalPERS program will launch in the fourth quarter of 2005, and as part of the program CalPERS will also provide some firms with assistance in business management and development.

“We view our selection as strategic adviser in the spring-fed pool to CalPERS as further evidence of the significantly enhanced risk management capability Bear Measurisk adds for the management and selection of hedge fund of fund products,” said Richard Martin, chairman of Bear Stearns Asset Management, in a statement.

Lastly, Legato is an emerging manager of managers firm that is owned mainly by its founder Victor Hymes and partially by funding partner firm Forward Management. This firm is focused on long-only emerging managers with an emphasis on small/mid-cap equity firms.

Contact Bob Keane with questions or comments at [email protected].


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