Texas Fund Cuts Hedge Fund Allocation By 1 Percent

The Teacher Retirement System of Texas, one of the largest pension funds in the country, announced Thursday it would cut its allocation to hedge funds by 1 percent. It also changed its target allocations for equities and bonds.

Reported by Bloomberg:

The board of the $126 billion Texas system approved the change today following an asset allocation study, Howard Goldman, a spokesman, said by e-mail. Texas will reduce hedge funds to 8 percent of the pension from 9 percent, according to board documents.

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Besides reducing its bet on hedge funds, the Texas pension lowered the portion of assets it gives to equities by 4 percentage points and to fixed-income securities by 2 percentage points, while adding 5 percentage points each to risk parity and private markets, according to board documents. Risk parity is a strategy for investing based on allocation of risk and private equity and real assets.

“These new allocations are expected to be funded from a diverse set of asset classes across the trust in order to increase the overall probability that TRS will be able to achieve the 8 percent actuarial return target,” according to a statement provided by Goldman.

TRS Texas is approximately 80 percent funded. It is the sixth-largest public pension fund in the United States.