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First CalPERS, Now Texas Teachers Cut Hedge Fund Exposure

Earlier in the week, perhaps reflecting on the fact that 90% of hedge fund managers are overpaid, California Public Employers Retirement System (CalPERS) announced it would cut its entire exposure to hedge funds. It seems the decision is becoming more popular, as Bloomberg reports, the Teacher Retirement System of Texas, the sixth-largest U.S. public pension, has decided to cut its hedge fund allocation by 1 percentage point to only 8% of the fund. The decision enables the fund to reduce equity exposure and raise fixed income exposure.

 

As Bloomberg reports,

Texas will reduce hedge funds to 8 percent of the pension from 9 percent, according to board documents.

The board of the $126 billion Texas system approved the change today following an asset allocation study, Howard Goldman, a spokesman, said by e-mail.

...

Besides reducing its bet on hedge funds, the Texas pension lowered the portion of assets it gives to equities by 4 percentage points and to fixed-income securities by 2 percentage points, while adding 5 percentage points each to risk parity and private markets, according to board documents. Risk parity is a strategy for investing based on allocation of risk and private equity and real assets.

...

Texas Teachers’ has an unfunded liability of about $28.9 billion, meaning it has 80.8 percent of the assets needed to fund future payments to retirees.

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Hardly surprising, as we noted previously...

Performance has not been great...

 

as Hedge funds have become nothing but beta...

 

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But perhaps the most notable fact from the Texas pension fund's statement is its great rotation from stocks to bonds...