BOSTON (Reuters) – Massachusetts will remove $1.6 billion from hedge fund managers Blackstone (BX.N), Crestline, EIM Management, and Strategic Investment Group as it rethinks its investment strategy after suffering recent heavy losses.
Trustees for the roughly $40 billion fund voted on Tuesday to scrap the four firms, who all invested money in portable alpha, a once popular technique used by pension funds to try and beat markets that underperformed during the financial crisis.
“This is a strategic shift and not a dissatisfaction with the individual managers,” the pension fund’s chief investment officer Stanley Mavromates said.
The Massachusetts state fund, which has bet on hedge funds since 2004 and has long delivered some of the strongest returns among U.S. public funds, had allocated 5 percent directly with hedge funds and had a 6 percent portable alpha investment, leaving it with an 11 percent allocation to absolute return strategies. The state will keep the five managers it uses to make hedge fund investments.
Battered by heavy losses, the trustees voted two months ago to scrap the portable alpha strategy and reduce the fund’s overall allocation to alternative strategies to 8 percent. (Reporting by Svea Herbst-Bayliss; editing by Gunna Dickson)