NYC Pensions Turn Over $450 Million to Two Hedge Funds

The $120 billion retirement system has allocated $450 million to event-driven Fir Tree and quantitative specialist Cantab Capital Partners. 

(February 7, 2013) — New York City’s five pension funds have together allocated nearly half a billion dollars to two hedge funds, according to the system’s Chief Investment Officer Larry Schloss.

These two investments boost the pension system’s hedge fund holdings by 25%. The asset class accounted for $1.75 billion of New York City’s total pension assets as of November 2012, and $2.2 billion as of this month.

Fir Tree Partners, an event-driven fund based in New York City, will receive $250 million from the $120 billion retirement system. The 19-year-old hedge fund focuses on value investments in equity markets and, starting in 2008, also runs real estate opportunity funds. Multi-strategy funds like Fir Tree returned 11.2% in aggregate during 2012, according to Boomerang Capital. Behind distressed securities, multi-strategy was the year’s the second-most successful hedge fund approach

Another public pension giant, the Teacher Retirement System of Texas, recently boosted its existing investment in Fir Tree’s Capital Opportunity Fund, adding $25 million during the closing months of 2012. 

Schloss and his investment team chose to diversify hedge fund strategies with the remaining $200 million. Cambridge, UK,-based Cantab Capital Partners takes a highly quantitative approach to its global, multi-asset investments. The tactical trading firm managed about $4.5 billion before this allocation, according to the Financial Times, and recently garnered attention for slashing fees with a new fund. Cantab will charge just 0.5% in management fees and 10% on performance for investors in its incoming Core Macro fund.

Out of the ten largest public pensions in the United States, Schloss reports that New York City’s system is one of only two that wholly outsource its asset management.