June 22, 2016 / 1:45 PM / 2 years ago

Private Advisors shakes up hedge fund investments, staff

NEW YORK, June 22 (Reuters) - Private Advisors is liquidating approximately $1 billion from a nearly two decade-old hedge fund investment strategy and its head of hedge funds has departed the firm, according to a spokesman with majority owner New York Life Investment Management Holdings.

The Richmond, Virginia-based firm decided in April to shut down a group of “low-volatility” funds of hedge funds that sought to produce bond-like returns by investing in hedge funds such as Paul Singer’s Elliott International and Paul Tudor Jones’ Tudor BVI Global.

The most prominent resulting departure was partner Tim Berry, a 15-year veteran who led hedge fund investments. Peter Lee and Sean McChesney, directors responsible for assessing managers, also left. Berry and Lee declined to comment and McChesney did not respond to a request for comment.

New York Life spokesman Jacqueline Meere said in an email on Tuesday that Private Advisors would continue to offer clients the opportunity to invest in a low-volatility mix of hedge funds.

Led by Chip Moelchert, Private Advisors managed more than $5.6 billion as of March, with more than 70 employees. That was down slightly from $6 billion and more than 80 employees as of September 2015, according to its website.

The firm recently added to its hedge fund team, hiring Kohlberg Kravis Roberts & Co alumnus Scott Henkin and former MidOcean Credit Partners employee Sam Goodyear to focus on credit-related investments. It also added about $2 billion in assets to its private equity business over the past 5 years, according to Meere. Private equity assets stood at $2.58 billion as of March 31.

The low-volatility hedge fund strategy, launched in 1998, was positioned in recent years to help clients - such as the Oklahoma Firefighters Pension and Retirement System and the University Health System Pension Plan in San Antonio - avoid the negative effects of rising interest rates, and act as a substitute for fixed income.

But rates largely stayed near record lows and clients got frustrated by several years of losses or meager returns, muted by a double layer of fees. A sizable group decided recently to pull out.

One version of the strategy, the Private Advisors Stable Value ERISA Fund, produced a 5-year average annual return of 3.13 percent as of September 30, 2015, a touch above the 3.10 percent return investors would have earned from the Barclays Aggregate Bond Index, according to confidential investor materials seen by Reuters.

Reporting by Lawrence Delevingne; Editing by Carmel Crimmins and Nick Zieminski

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