Michigan Hedge Funds Investments

Michigan Pension Cuts Private Equity, Triples Hedge Funds

Michigan's state pension fund has made a big statement about its confidence in hedge funds and lack of enthusiasm for private equity. The Michigan State Retirement Systems has tripled its allocation to hedge funds while simultaneously reducing its allocation to private equity. The fund upped its hedge funds investments from 2% to 6% of the total portfolio and reduced its much larger commitment to private equity from 20% to 14%. This is pretty emblematic of institutional investors' feelings toward alternative investments, as hedge funds continue to gain fundraising ground while private equity loses commitments.

The $45 billion public pension fund has boosted its hedge fund allocation from 2% to 6%, Pensions & Investments reports. The hedge fund increase, as well as that of real return and opportunistic funds from 1% to 4%, will be funded by a sizeable cut in its private equity allocation from 20% to 14%. The reduction in p.e. investments will be undertaken gradually.

The increased hedge fund allocation will begin to take effect in October, the beginning of the Michigan Systems’ fiscal year. But the pension already invested an additional $203 million with Aetos Capital in June; Aetos runs a customized fund of hedge funds portfolio for the systems.

“Private equity has done well for the funds, but with increasing liquidity needs over the next several years, the change will reduce illiquid asset holdings,” Terry Stanton, a spokesman for the Michigan Department of Treasury, told P&I. Source

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