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California Retirement To Divest Dollars In Hedge Funds

Sep 19 2014

English: CalPERS headquarters at Lincoln Plaza...

English: CalPERS headquarters at Lincoln Plaza in Sacramento. (Photo credit: Wikipedia)

The California Public Employees' Retirement System will be selling off a whopping $4 billion from hedge funds, citing their tangled nature and high costs.

Ted Eliopoulos, Interim Chief Investment Officer for the retirement system, says officials are not dumping the hedge funds because of their results. Now, the board of Calpers will take at least 12 months to decide where the billions of dollars will go after the divestiture.

Ted Eliopoulos elaborated that because of the very nature of the hedge fund and the costs related to it, the fund should definitely go. The size of the California Public Employees' Retirement System factored into questions about realistically scaling the hedge fund. Eliopoulos said Calpers just could not pare down the program to a useful size.

While the biggest pension program in the United States is leaving its these funds behind, New Jersey and other states are growing actually growing portfolios. California began putting money in hedge funds back in 2002 to get better returns as retiree costs increased. Since then, Calpers lost one-third of its accumulated monies.

Calpers paid a huge amount in fees this past June. The amount was $135 million for investments that only yielded 7.1 percent. This added just 0.4 percent to the total earnings, says Calpers officials.

During the fiscal year, Calpers garnered 18.4 percent. Stocks across the world had done extremely well, and the market value Calpers was $300 billion by the start of July. Certainly,this figure was unprecedented, and it was larger in value than almost every single company, save 2, on the Dow Jones.

Calpers puts money in entities from Och-Ziff Capital Management Group LLC and Lansdowne Partners LP, as well as other big name companies. The investments are among those overseen by Rock Creek Group and Pacific Alternative Asset Management.

Calpers aims to get a solid 7.5 percent return on investment. Over the last decade, the annualized return on the hedge monies has been only 4.8 percent.

Calpers and hedge funds: End of an affair

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