Rosie Instance, Author at With Intelligence

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The Teachers’ Retirement System of the State of Illinois has terminated T. Rowe Price, one of its US large-cap growth equity managers, freeing up $779m in assets that could go toward a new fund.

Illinois Teachers decided to remove the Baltimore-based asset manager from its $23bn public equities bucket following internal shifts in the firm’s strategy, David Urbanek, director of communications at the system, told With Intelligence.

“The action by Illinois TRS on T. Rowe Price’s domestic large-capitalization growth account reflects a strategy change within the investment staff,” he said.

The asset manager’s large-cap growth equity fund has been led by PM Taymour Tamaddon since November 2017. The strategy is bullish on communication services and healthcare, sitting overweight the benchmark on those sectors.

The $66bn investor benchmarks T. Rowe’s growth equity fund against the S&P 500 index and first invested in the strategy in November 2006.

Consultant RVK recently shared with the pension that small and mid-cap equity strategies have outperformed large-cap strategies in recent months.

Illinois Teachers large-cap equity roster has six other managers including Acadian Asset Management, Arrowstreet Capital and Northern Trust.

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Despite the T. Rowe termination and its consultant’s reluctance in the asset class, Illinois Teachers is still seeing fruitful opportunities in the market.

RhumbLine Advisers, which oversees $10.2bn in the total portfolio including a large-cap strategy, received a $400m commitment from the allocator and leans in on US large-cap equities.

Illinois Teachers declined to comment further on its next steps following T. Rowe Price’s termination.

Should Illinois Teachers conduct a manager replacement search, it will consult with RVK during the process.

Key investment heads at Illinois Teachers include CIO Stan Rupnik and Benjamin Skrodzki, senior investment officer for global equities.

Illinois Teachers has its next board meeting on April 21.

T. Rowe Price declined to comment.

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Former Partners Capital duo launch FoF business

Valence8 launches three new funds to invest in HF, PE and traditional equities managers

Caroline Ryan
8 APR 2022

The former Partners Capital CIO and head of North America have teamed up to launch a fund of funds business that will invest in hedge funds, private equity and venture capital funds, as well as traditional equities managers.

London-based Colin Pan, most recently the CIO at the $35bn private investment office, and Boston-based Brendan Corcoran, a former Partners Capital head of North America, are joined in the launch of Valence8 by George Lai and Alejandro Goldberg.

San Francisco-based Lai was most recently a managing director at a family office, and New York-based Goldberg was a portfolio manager at MIO, which provides asset management services for McKinsey’s retirement plan. In February 2022, it hired Lawrence Small as the firms CCO.

To invest in hedge funds Valence8 launched a fund named, Diversified Strategies, which will back managers running strategies with low correlation to traditional markets and other active investment managers.

It is understood for long/short equity and multi-strategy funds, Valence8 is interested in North America, Europe, and the Asia Pacific. For arbitrage/relative value strategies, the firm is focused on North America and Europe.

The firm’s Valence8 Directional Opportunities fund invests in public markets using a long-only or long-biased strategy, and the Valence8 PE 2022 Fund will offer investments in private equity and venture capital strategies.

Investments may include limited partnerships and funds, co-investments and direct investments in companies backed by private equity sponsors.

The firm may invest part (for Directional Opportunities and Diversified strategies), or all (for the private equity and venture capital strategy) of clients’ assets in investments in illiquid securities, or funds or securities that do not have a readily ascertainable market value, according to a regulatory filing.

It is understood that the firm works with high-net worth individuals, family offices, trusts, investment companies, family foundations and institutional clients. Clients must have a minimum of $200m available for investments, although the amount may differ depending on each fund.

The firm has $312m in regulatory AuM.

Valence8 did not respond to a request for comment.

San Francisco snaps up Florida deputy as CIO

Alison Romano takes helm at $35bn plan amid SBA’s halt on China investments

Gabby Stranieri
8 APR 2022

The San Francisco City & County Employees Retirement System has snapped up Alison Romano, deputy CIO of the Florida State Board of Administration, as its new CIO and CEO.

Romano will replace acting executive director Jay Huish to oversee the administration and investment of San Francisco’s $35bn pension plan, and Kurt Braitberg, who has been serving as interim CIO since July.

Braitberg will return to his previous position as managing director for public markets after Romano begins her role at the pension, a spokesperson for San Francisco confirmed to With Intelligence.

Romano’s departure from Florida SBA, which oversees the state’s $200bn pension fund, comes after a 13-year tenure. As deputy CIO, Romano was responsible for investment oversight across all asset classes, including its 9.6% or $19.2bn allocation to strategic investments, which includes hedge funds strategies.

San Francisco, meanwhile, dedicates 10% or $3.7bn to absolute return, as of December 2021, on par with its target weight. Notably, some 17.8% of the investments were with China-oriented managers, as of June figures when the data was last available.

How this could be impacted by Romano’s appointment remains to be seen: Florida SBA recently announced a halt to new China-related investments, citing downside risk due to the government crackdown on high-tech and for-profit sectors, among other concerns.

“SFERS does not have a comment about impacts to China-related investments at this time,” a representative told With Intelligence.

Romano’s departure from Florida comes as the system is still seeking a permanent replacement for its top job. Lamar Taylor has been serving as interim CIO at the fund since former chief Ash Williams stepped down in September.

“Over the last 13 years at the Florida SBA, I have enjoyed investing and managing retirement assets for the benefit of those who have dedicated their lives to public service. … I am thrilled to join and lead an innovative and forward-looking team at SFERS that has delivered nationally recognized investment performance on behalf of their members,” said Romano.

Representatives for Florida SBA did not immediately return a request for comment.

The article was updated on April 11, 2022 with San Francisco’s reply to a request for comment. 

JPMorgan AM execs spin off opportunistic RE platform

Junius Real Estate Partners is no longer part of JPMorgan and is launching independently as JRE Partners

Fotios Tsarouhis
30 MAR 2022

A team of JPMorgan Asset Management executives is spinning off a real estate platform and is gearing up to launch as an independent company.

With Intelligence understands that Junius Real Estate Partners is no longer part of JPMorgan and has rebranded as JRE Partners.

The boutique real estate investment firm, which focuses on real estate equity and debt investments, is now privately owned and operated and no longer affiliated with its former parent.

JRE Partners, like its predecessor, will focus on sourcing, structuring and managing private mid-to-large-scale investments in the US residential and commercial real estate sectors.

The firm’s 10-member investment team, entirely comprised of former Junius team members, will be led by managing principal John Fraser and based in New York.

Fraser, formerly a managing director at JPMorgan, had led Junius since its 2011 founding. Alexander Mitzner, also a managing director for JPMorgan, and Brian Thomas, an executive director at the financial services giant, are principals at JRE. In addition to that, it is understood that Thomas will act as CFO, COO and CCO for JRE Partners.

A quintet of former JP Morgan executive directors, Georgina Carnazza, John Cooper, Jeffrey Hadzima, Shannon Lovetere and Kevin Straub, have been named directors at the new company, as have Amy Donelson DiChiara and Michael Tompkins, both formerly vice presidents at JP Morgan.

Tompkins focused on acquisitions and asset management at Junius, while Straub’s focus was on development and construction, responsibilities he will carry over to JRE. All members of the new JRE team head to the firm directly from its predecessor, with the exception of DiChiara, who worked on the Junius team at JP Morgan from 2014 to 2017 before joining JRE this month.

Junius, a specialized real estate investment unit of JPMorgan Private Bank, a division of JPMorgan AM, was launched in 2011 when the firm hired Fraser from Investcorp. The New York-based business managed assets separately from JPMorgan’s existing real estate asset management business.

Officials a JRE Partners declined to comment. Representatives of JP Morgan did not respond to inquiries.

Chinese equity HF losses follow dismal 2021

Pictet’s Mandarin loses 4.7% in March, Golden China fund down 12%

Manas Pratap Singh
30 MAR 2022

China-focused long/short equity hedge funds have suffered heavy losses in the first quarter, following losses last year by many funds in the region.

March saw the third straight month of Chinese equity-focused losses. Greenwoods, which runs $2.7bn in its Golden China Fund, was down 11.8% for the month by March 18, bringing the fund’s Q1 losses to 23.6%. It lost 7.4% in 2021.

Pictet Asset Management‘s directional long/short Mandarin Fund followed a similar pattern. The $1bn fund run by regional specialist Lan Wang Simond was down 4.7% for the month to 28 March and is now down 8.7% for the year. It lost 4.6% in 2021.

$1.3bn Pinpoint China Fund, one of the few long/short equity hedge funds that managed to churn out positive results in February, was down 10.9% in the first half of March, putting it down 5.8% for the year.

In 2022, China-focused hedge funds have faced a decline due to major regulatory worries within the tech sphere, the restructuring of the real estate company Evergrande and the broader sell-off in global equities. All of this made it more volatile due to China’s ‘zero Covid’ policy which has caused multiple lockdowns in the past months.

So far this year, the Shanghai Composite Index has lost 10.5%, with stocks of some of China’s major tech companies like Tencent and Xioami losing 13.7% and 23.9% so far this year.

More recently, in March, the negative investor sentiment in the Chinese market came from the unclear position of the country’s leadership on the Russian invasion of Ukraine, a portfolio manager with exposure to Chinese equities told With Intelligence. This sent some of the shockwaves of the sell-off in Russian markets into Chinese markets.

March saw foreign investors offloading $9.5 billion worth of mainland Chinese stocks, with the outflow as of March 24 the biggest since March 2020 at the peak Covid-19 panic sell-off.

But while China’s ties to Russia have created a new geopolitical concern that pressures investors to avoid Chinese assets, not all are spooked. According to BlackRock’s outlook for Q2 2022, the investment manager remains “moderately overweight” in Chinese stocks as it sees a shift to easier policies across the board.

While last year and the year so far have been challenging for Chinese equity hedge funds, the same managers, on average, returned 28.2% in 2020, according to EurekaHedge data.

UBS Asset Management also views Chinese capital markets as providing opportunities as we advance. This includes the long-term trends that make China attractive, like its transition to a domestic, service-oriented economy, rise in healthcare, automation and digitization spending, and the move towards green energy and a cleaner environment.

Texas Municipal loses senior PM for private equity, venture

Peter Teneriello played key role in $37.8bn investor’s VC, buyout roster

Harry Walker
23 MAR 2022

Peter Teneriello, senior portfolio manager at the Texas Municipal Retirement System, has left the $37.8bn investor after four years of building its private equity portfolio.

Teneriello played a key role in ramping up the fund’s venture capital program, taking its roster from one manager to seven over the course of his tenure.

Texas Municipal’s private equity portfolio accounts for 7.7% or $2.9bn of its overall assets against a 10% or $3.8bn target. Buyouts make up the lion’s share of the bucket, followed closely by venture investments predominantly in tech and software, and alongside a smaller sleeve dedicated to special situations.

The system has a tendency to go after lower mid-market buyout strategies, making it a comparably bold investor relative to its institutional peers in the space.

Likewise, enthusiasm for VC strategies is not as common among public pension funds given the elevated levels of risk.

“If you’d have told me four years ago that this is the portfolio I was going to end up building, I wouldn’t necessarily have said you were crazy, but that’s a tall task to complete,” Teneriello told With Intelligence.

“I’m really proud of what we built at TMRS. It’s not easy for public pensions to invest in private markets, let alone venture capital, and despite the odds being against us in a lot of ways we built a really special portfolio.”

Greenoaks, Techstars, Altimeter and Dragoneer are among the venture partnerships on Texas Municipal’s roster. The investor began its foray into the space with a 2016 investment in Foundry Next.

“Of all the groups in the venture universe, I thought these groups best exemplify what it means to invest like artists – to combine creativity and vision in the way they invest, and that’s the portfolio I ended up building,” Teneriello added.

Teneriello declined to comment on his next project. Texas Municipal did not respond to requests for comment.

The investor next meets on March 24.

Weinberg Foundation picks deputy David Gilmore for CIO

The $3.3bn foundation is moving toward non-correlated, illiquid funds

Michaila Byrne
28 MAR 2022

The Harry and Jeanette Weinberg Foundation has chosen deputy chief David Gilmore to succeed Jonathan Hook as CIO as it continues to transition the portfolio into more illiquid, non-correlated investment strategies.

The $3.3bn institution is one of the largest private charitable foundations in the US, investing globally across all asset classes including hedge funds, private equity, venture capital and real assets.

Weinberg likely has exposure to hedge fund strategies through its growth portfolio, which invests in long-only and long/short equities alongside private equity investments.

The foundation is in the process of a multi-year operation to redeploy capital to more illiquid, alternative funds and is also interested in more idiosyncratic, non-correlated strategies.

“I think we’re trying to find things that are a little off the beaten path and not everyone is focused or jumping into them. So places where capital may be a little bit more scarce,” Hook told With Intelligence last year, highlighting the energy sector as a potential area of interest.

In 2018, the investment team began work on reshaping its portfolio to make D&I a priority. Now in the initiative’s third year, the foundation has surpassed its five-year goal of allocating more capital to minority/women-owned businesses by 5%, with nearly 30% of fund managers led by women and/or people of color. It continues to seek diverse managers in every asset class.

The foundation works closely with consultant Albourne Partners to discuss matters of recruitment and perform due diligence on the portfolio.

Hook and Gilmore joined the foundation together nearly nine years ago. Hook served as the foundation’s inaugural CIO and established its investment office.

The pair has managed the fund’s capital internally since its inception, growing total assets by nearly 60% from $2.1bn to its current $3.3bn asset size.

The foundation’s investment offices are based in Baltimore and Hawaii and are supported by four external investment advisers who, together with trustees Paula Pretlow and Nimrod Goor, comprise the foundation’s investment advisory committee.

Gilmore steps into the role with substantial experience under his belt, having served as managing director of investments at the foundation in addition to his current role as deputy CIO. He previously served as a partner for the independent investment advisory firm Gerber Taylor Capital Advisors.

“I appreciate the support and confidence of the board, as well as the president and CEO [Rachel Monroe], as we continue to manage the foundation’s assets, including designing and implementing the foundation’s strategic and tactical asset allocation, overseeing risk management and market research, and leading the foundation’s efforts to diversify its investment manager portfolio,” Gilmore said.

Hook will officially step down as CIO on August 31.

Oregon introduces event, multi-strat HFs in $750m spend

Caxton, Davidson Kempner and Hudson Bay join the $95bn fund’s major expansion

Connor Owen
16 MAR 2022

The $95bn Oregon Public Employees Retirement Fund has branched into new strategies as part of its ongoing hedge funds buildout, awarding a combined $750m to three managers across event-driven, global macro and multi-strategy.

Allocations of $250m each to Caxton Global Investments, Davidson Kempner Institutional Partners and Hudson Bay Fund were announced by CIO Rex Kim at the Oregon Investment Council’s March 9 meeting.

Event-driven and multi-strategy hedge funds are a new approach within Oregon’s diversifying strategies portfolio, which previously comprised of a mix of alternative risk premia, global macro and managed futures.

Oregon allocates 3.6%, or roughly $3.4bn, to diversifying strategies, falling far short of its 7.5%, or $7.1bn, target. Albourne Partners was brought in as a specialty consultant in late 2020 as the investor sought to overhaul and scale up the allocation.

Davidson Kempner runs a multi-strategy, event-driven hedge fund, focusing on areas such as merger arbitrage, restructuring and distressed situations, while Hudson Bay’s multi-strategy flagship pursues relative value opportunities.

Other Albourne clients investing in both Davidson Kempner and Hudson Bay include the Kern County Employees Retirement Association and Los Angeles County Employees Retirement Association (LACERA).

Kern County allocates to both managers as part of its portable alpha program — a nod to their low-beta approach — with around $55m invested in each. LACERA allocates a more substantial $492m to Kempner and $631m to Hudson Bay.

The hiring of Caxton also underscores a shift in approach under Albourne’s guidance; the portfolio previously included only systematic macro, but Oregon’s more recent macro hires have been in the discretionary space.

This trio of new manager hires arrive hot on the heels of a $500m allocation split between Brevan Howard and Man AHL in January, marking a busy start to the year for the diversifying strategies portfolio.

Oregon may seek to keep future hires at a similar mandate size, given that its last six new hedge funds were all awarded $250m each. Furthermore, the investor could look to reduce the allocation to some of its existing managers, four of which handle over $500m.

Separately, the investor also has a $2.2bn allocation to risk parity. This position has been marked for further consideration in Oregon’s upcoming asset allocation study, potentially to be increased or to be zeroed-out.

South Carolina ups portable alpha target by almost $850m

The $41bn investor is readying the low-beta sleeve ahead of short-term volatility

Adam Rees
16 MAR 2022

The $41.6bn South Carolina Retirement System Investment Commission has increased its allowable exposure to portable alpha strategies, comprised of low beta hedge funds, in anticipation of short-term market volatility.

Portable alpha doesn’t have a specific target allocation, but rather an agreed range in which capital can be deployed as needed.

As of the end of 2021, exposure sat at 10.9%, or $4.5bn, of the broader portfolio, with a cap of 12%. The range is between 0%–12%.

CEO Michael Hitchcock recommended upping the cap to 15% at the commission’s March 3 meeting, giving the system an additional $832m to play with.

“The portfolio is designed to be a low beta portfolio and it’s designed to do well for us, or attempt to do well for us, regardless of what’s happening in the overall markets,” Hitchcock said, noting the strategy’s lack of meaningful market correlation.

South Carolina has utilized the strategy for more than half a decade now and has earned $1bn in excess returns — a performance owed to a mix of manager selection and the structure of the portfolio.

And so long as the strategies invested in outperform the cash rate, the investor generates an uncorrelated source of additional return.

“What we don’t want to do is redeem from the portfolio in the event of a significant market sell-off,” Hitchcock added.

Most of the $4.5bn portfolio is currently managed by Lighthouse Partners through managed accounts.

The investor also has tickets with Wellington ($300m) and Man Group ($200m), agreed in 2017.

At the same meeting, CIO Geoffrey Berg noted the portfolio was “doing exactly what we hope it will.”

The cap range increase notwithstanding, Berg noted in January that if rates started to rise — and they are expected to more than once this year — a portfolio revisit may be required.

When this revisit might happen remains to be seen — and at this stage, no further changes are anticipated.

A popular choice

The commission is not the only investor to recognize the desirability of portable alpha.

Earlier this month, the New Mexico Public Employees Retirement Association hinted it would revisit the space after a pause brought about by high-level departures, and Kern County, another US-based investor with exposure to the asset class, has also been mulling increased exposure. The $5.6bn pension is eyeing two new hedge fund managers as part of an allocation review.

 

Texas Teachers hunts tech-focused emerging HFs

The $204bn system is also building a premier list of EM program advisers

Connor Owen
22 FEB 2022

The Teacher Retirement System of Texas (TRS) will assess tech-focused equity hedge funds and long-only opportunities this year within its emerging manager program.

The $204bn system’s technology sector search initiative will be a key area of focus for its emerging manager program in 2022, Kirk Sims, emerging manager director, shared as part of his annual program updates.

Texas Teacher’s emerging manager program is valued at $2.5bn, of which $527m is allocated to public markets, as of September 2021. The half-billion allocation includes both long-only equities and hedge fund strategies, such as credit, equity long/short, event-driven and equity market-neutral.

The sole requirement set by TRS for prospective emerging managers in public markets strategies, including hedge funds, is to have an AuM lower than $3bn. Initial manager allocations are typically in the $10m to $30m range.

TRS partners with The Rock Creek Group to oversee the public markets side of its emerging manager program, which first opened to hedge fund managers in 2011.

In addition to sourcing tech sector hedge funds for the program, TRS will look to promote existing emerging managers into its main investment portfolio with significantly larger allocations.

The qualifying criteria for a transitional capital program for hedge funds and long-only emerging managers, termed EM Select, was established in collaboration with Rock Creek last year. Managers have been ranked, and two top-tier candidates are in due diligence, Sims shared.

Finally, TRS’ emerging manager team also conducted a deep dive review of their existing hedge fund investments last year with respect to portfolio sizing and structure and evaluating prospective emerging managers. It added two new hedge funds as a result but has not yet disclosed identifying information.

Emerging hedge fund managers keen to engage with TRS were given a number of pointers last month by Lulu Llano, who oversees international equities and directional hedge funds in the system’s main investment portfolio.

Llano advised prospective hedge funds to fine-tune their pitch, ensuring they can articulate a clearly defined investment philosophy and process, but also have patience when dealing with large public pensions like TRS.

“We’re slow-moving, so begin to build a dialogue and connections even if you’re not a fit now – if you invest in cultivating relationships, it could open a door in the future,” she said at TRS’ annual emerging manager conference on January 19.

In search of specialist emerging manager advisers

TRS staff are in the process of reviewing the landscape of third-party emerging manager program advisers, surveying firms that offer emerging manager-type programs across public and private market strategies.

Following this review, the system is developing a premier list for emerging manager industry specialists, which would create a bench of available program advisers.

In addition to Rock Creek, the system currently works with GCM Grosvenor as an emerging manager program adviser.

Other emerging manager program advisers in the space include PAAMCO Prisma and Stable Asset Management; both of which have picked up hedge fund-specific mandates from US pensions in recent years.

PAAMCO was selected as the Massachusetts Pension Reserves Investment Management Board’s emerging hedge fund manager lead in December 2021, and is also retained by the Employees Retirement System of Texas for its hedge fund seeding platform.

Meanwhile, Stable was hired as the Los Angeles County Employees Retirement Association’s emerging hedge fund lead in December 2020. Four new managers were onboarded into the program in the third quarter of last year, receiving a combined allocation of $155m.