CalSTRS Invests $100 Million With Red Mountain Hedge Fund

CalSTRS invested $100 million with Red Mountain Capital Partners earlier this year, according to a report from Reuters.

The move is notable because CalSTRS’ allocation to hedge funds is relatively small, and because Red Mountain has produced strong returns in recent years.

More from Reuters:

Red Mountain was founded by former Goldman Sachs partner Willem Mesdag in 2005. The fund makes bets on small U.S.-based companies and works generally quietly with management to boost returns.

The $191 billion CalSTRS has less than one percent of its investments in alternatives like hedge funds, typically favoring activist investors that stay out of the headlines. It has signaled it will continue to place money with hedge funds after its larger neighboring pension fund, the California Public Employees’ Retirement System, ditched hedge funds last year.


One of Red Mountain’s recent investments was a bet on fried chicken fast food restaurant Popeyes Louisiana Kitchen, where it owned 1.2 million shares and ranked as the company’s second-largest investor after Vanguard Group at the end of 2014.

While Red Mountain tends to hold investments for a substantial period of time, it made a roughly 50 percent gain on Popeyes, prompting it to exit the stock recently, one person familiar with the move said. The firm has returned an average 12.6 percent per year over the last five years.

CalSTRS is the second-largest pension fund in the country.


Photo by Stephen Curtin

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