Administration April 2, 2004

MA State Fund OKs VC Allocation

February 4, 2004 (PLANSPONSOR.com) - The board of the Massachusetts state pension fund has voted to commit $800 million to venture capital and buyout funds if money managers can find top-quality funds in which to place the assets.

Reported by

Fred Schneyer

Board members decided that the allocation was not mandatory. “We’re not going to force that number,” said state Treasurer Timothy Cahill, a fund board member.

In other asset allocation moves, the board voted to:

Invest $750 million in junk bonds with two firms as part of an effort to raise the fund’s stake in high-yield debt to 5% from 2%
Invest $25 million in low-income home loans in the state, through Access Capital Strategies Community Investment Fund in Cambridge. This is the first commitment of the pension fund’s economically targeted investing program.

Separately, the board raised the amount of leverage the fund can use to buy real estate, to 50% from 40%, despite nervousness among some trustees about assuming a riskier position. The board also lifted the cap on investments in a single building, to $200 million from $150 million, so the fund can bid on a large New York City property.

Cahill has long been a proponent of taking a more aggressive investing posture, complaining at one point that state rules against public pension funds taking a hedge fund position hurt his effectiveness when he ran pension investments for Norfolk County. (See Treasurer Blames Lack of Hedge Funds for County Losses ).