PERAC Memo #44 - 2009: Hedge Fund Guidelines

MEMORANDUM #44, 2009 M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: Hedge Fund Guidelines DATE: November 16, 2009 There have been a number of revisions to PERAC’s hedge fund guidelines in recent years. Although all such changes have been explained in general PERAC memoranda however, it has recently come to my attention that some boards may not be aware of these changes. The purpose of this memo is to clear up any confusion that might still exist. PERAC Memorandum #37 (2008) on November 10, 2008 stated that the asset size standard determining which local boards could invest in hedge funds on their own was lowered from $250 million to $150 million. It stated that investment in hedge funds cannot exceed the combined percentage of the PRIT Core Fund’s allocations to Absolute Return and Portable Alpha. Any amount above 50% of the maximum percentage must be invested in the PRIT Absolute Return segment. At the time of the issuance of this memo, PRIT’s total allocation was 11%. Following the PRIM Board’s decision in August to terminate its Portable Alpha Program and increase its Absolute Return (re-named Hedge Funds) allocation to 8%, PERAC issued Memorandum #32 (2009) on August 27, 2009. This memo stated that the maximum allowed allocation to hedge funds was correspondingly lowered from 11% to 8%. Systems that already had allocations above 8% were not required to reduce their holdings. For your convenience, we are enclosing copies of these PERAC memoranda. As before, any system regardless of asset size may invest in PRIM’s hedge fund segment up to the applicable maximum (now 8%) without PERAC approval. As before, boards may request exceptions from any aspect of the guidelines through the supplementary regulation process. As before, hedge fund investments are strictly limited to funds of funds. As you know, Investment Director Robert Dennis is pleased to respond to any retirement board inquiries regarding hedge funds. Attachment