Wisconsin Pension Pumps Up Investment in Hedge Funds

(October 27, 2011) — After a relatively late start into the hedge fund space — investing into the sector for the first time in February — the roughly $78.6 billion State of Wisconsin Investment Board (SWIB) has pumped up its investment into the asset class. The fund invested a total of roughly $300 million in hedge funds as of August 31, with an additional $100 million in October. There are no final numbers available for the month of September, the fund’s spokesperson Vicki Hearing told aiCIO. 

“SWIB’s move into hedge funds has been slow and deliberate beginning in January 2010 with the approval of the asset allocation that included a hedge fund strategy,” Hearing said, noting that the money used to fund the hedge fund portfolio came from rebalancing during market changes into cash, or a liquidity fund.

The investment by the fund into the hedge fund space was made by investing $100 million each for hedge funds portfolios managed by Claren Road Asset Management (in July) and Ascend Wilson Fund LP (in October). Other funds include MKP Credit LP and Capula with $100 million each earlier this year.

“The multiple manager hedge fund portfolio will be diversified by style, strategy, geography and manager,” Hearing said, adding that SWIB will continue to work with hedge fund consultant, Cliffwater, LLC, and is looking at funding a total of 15 to 20 managers. The allocation to the sector translates to a total of 2% of assets.

In February, SWIB made its first-ever allocation to hedge funds. In January, SWIB said it had invested $600 million with two risk parity strategy managers to achieve diversification and continued solid returns. SWIB allocated $300 million each to AQR Capital Management and Bridgewater Associates’ All Weather vehicle. According to the board, the additional risk parity portfolios were part of a plan to offer further diversification. “We first approved this asset allocation in January, and we knew this would be a very slow process,” Hearing said in August of last year. 

The increasing attractiveness of hedge funds among institutional investors is supported by a report from Preqin released early this year that revealed institutional investors now constitute the largest piece of the hedge fund capital pie.