Keystone State Fund Ups its Hedge Fund Ante

January 23, 2004 ( - As are many other institutional investors, the Pennsylvania State Employees' Retirement System (SERS) is dipping its toe further into the hedge fund pool.

The SERS board recently approved a plan to double its hedge-fund target to 20% of the $24 billion system’s assets over the next two years, according to The Philadelphia Inquirer. The City of Philadelphia pension system also is looking for hedge managers and the larger New Jersey state and Pennsylvania teachers’ funds are weighing such a move.

In 2002, the system invested $2.5 billion in four funds of funds The value of the position rose to $2.8 billion by the end of 2003, but the four hedge funds’ collective return trailed the increase in the retirement system’s overall investment portfolio by about 50%.

The four hedge-fund pools with SERS money are:

  • Blackstone Alternative Asset Management, New York ($750 million in 2002)
  • Mesirow Advanced Strategies Inc., Chicago ($575 million)
  • Morgan Stanley Alternative Investment Partners, New York ($575 million)
  • Pacific Alternative Asset Management Co., Irvine, California ($575 million).

SERS pays pensions to 91,000 retired legislators, judges, and other state workers, funded by a mix of investment profits and taxpayer subsidies.