Massachusetts' pension up 13.9 pct in 2012, stocks fuel gains

BOSTON Tue Feb 5, 2013 10:17am EST

BOSTON Feb 5 (Reuters) - Massachusetts' $50 billion state pension fund gained 13.9 percent in 2012, fueled by strong returns in global equities and private equity.

"We had a terrific year," Michael Trotsky, the fund's chief investment officer and executive director said on Tuesday at a public meeting. "Our investment mangers are doing a very good job for us," he added.

The fund, one of the country's biggest public pensions, outperformed its policy benchmark by 84 basis points.

Looking back on 2012 when stocks fared well, the fund's investments in global equities gained 17.5 percent while private equity investments gained 15.8 percent.

Core fixed income gained only 6.35 percent.

Massachusetts, which has roughly $5 billion invested in hedge funds, said that the hedge fund managers it employs gained 8.42 percent last year, beating the fund's 4.8 percent benchmark for this asset class. The state has invested with big name managers including Paul Singer, Alan Howard, and William Ackman.

Trotsky, who took on the role of CIO last year, said he plans to spend more time this year meeting the managers who invest money for the fund.

The fund recently opted to pick its hedge fund managers directly instead of paying extra fees to so-called funds of funds for that work. The move is expected to save the pension fund $36 million a year in fees.

In November, the fund hired Eric Nierenberg, a former money manager and business school professor, as its senior investment officer overseeing hedge funds and low volatility strategies. Earlier this year, the fund hired Michael Bailey as its senior investment officer for private equity investments.

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