BOSTON The Massachusetts state pension fund, which invests roughly $5 billion in hedge funds, has pulled money out of Brevan Howard, one of the industry's most prominent firms, a spokesman for the pension fund confirmed on Tuesday.
The $62.7 billion pension fund has been invested with Brevan Howard since November 2011. The spokesman declined to say how much the pension fund had invested with Brevan Howard or when it first asked to get its money back.
Brevan Howard, whose Master fund once ranked among the industry's most widely sought investments, has been facing a steady stream of redemption notices as performance has been lackluster in the last few years.
Brevan Howard, which invests roughly $12 billion and makes bets on currencies, stocks and interest rates, ended 2016 with gains of 3 percent, following losses in 2014 and 2015. But its long-term record for the Massachusetts pension fund has been has been lackluster, gaining only an average 1.4 percent a year since 2011.
Some industry analysts say Brevan Howard, which posted strong returns until 2013, keenly felt the departure of star trader Chris Rokos, who left in 2012 and now runs his own fund.
Brevan Howard had been a darling of the U.S. pension fund community, but state funds in Rhode Island and New Jersey have been among those pulling money in recent months.
While some of these pension funds have decided to cut their allocations to hedge funds, Massachusetts is sticking with them. The pension fund's executive director and officer in charge of picking them say the Massachusetts fund is using hedge funds as investment vehicles, and that can protect on the downside.
Additionally, Massachusetts has been aggressively cutting costs by negotiating fees and demanding separately managed accounts where its money is not co-mingled with other investors. The pension fund is saving roughly $38 million a year by doing this.
The pension fund has also moved away from the big-name, established funds in favor of smaller newcomers. Last year the pension fund hired Land and Buildings Investment Management, based in Stamford, Connecticut, Informed Portfolio Management, based in Stockholm, and East Lodge Capital, based in London.
Last year, the Massachusetts pension fund earned an 8 percent return with its basket of more than two dozen hedge funds returning 4.4 percent. The HFRI Asset Weighted Composite Index gained 3.10 percent last year.
(Reporting by Svea Herbst-Bayliss; Editing by Phil Berlowitz and Leslie Adler)