VRS Selects CAGM To Manage $200 Million in Hedge Fund Dollars

August 27, 2003 (PLANSPONSOR.com) - The Virginia Retirement System (VRS) has tapped CAGM Rock Creek as the second manager for its $1-billion hedge fund initiative, as the system tries to shake three years of declines.

CAGM will be allotted $200 million by the $35-billion pension plan, which before June, had no money allocated to hedge funds, according to a news release.   Earlier VRS announced a $300-million allocation to Ivy Asset Management.

The move to alternative investments comes after VRS announced plans to set aside 3% of its assets for hedge fund investments as part of an asset allocation shakeup.   With the allocations, VRS said it plans to initially invest in three types of hedge fund strategies:

  • equity market neutral
  • equity long/short
  • distressed/event driven.

These strategies were selected since they are among the most risk-controlled in the industry, VRS said in the release.

While no information on VRS’ previous asset allocation was immediately available, the money earmarked for hedge funds appears to have come at the expense of the pension fund’s equity allocation.   Previously, the pension fund had allocated approximately 70% of its assets to domestic and international stocks.  However, the nation’s 29th largest pension plan will also allocate 46% of its portfolio to domestic equities, 22% to fixed income, 7% to international equities, 7% to private equity and 5% to real estate.

The move reflects a growing acceptance of hedge funds among public pension plans. Last month, the $144-billion California Public Employees Retirement Plan (CalPERS) decided to increase its allocation to hedge funds to as much as $3.2 billion from $1 billion (See  CalPERS Moves To Increase Hedge Fund Investments ).  Additionally, the Massachusetts Pension Reserves Investment Management Board (PRIM) approved a plan earlier this month to make its first investment in hedge funds, allocating 5% of its $28-billion portfolio (See  PRIM OKs Hedge Fund Foray ).