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Calpers Puts $100 Million of ‘Seed’ Money in Toronto Hedge Fund

Date: Friday, September 23, 2011
Author: James Nash, Bloomberg

The California Public Employees’ Retirement System, the largest U.S. pension, invested for the first time in a hedge-fund startup, putting $100 million into a Toronto-based firm.

The deal with Breton Hill Capital, which invests in equities and currencies as well as commodity and financial futures, represents Calpers’ first foray into seed funding for a money manager, Brad Pacheco, a Calpers spokesman, said yesterday in a telephone interview.

Calpers, with $223.8 billion in assets, earned almost 21 percent on its investments in the 12 months through June, its largest gain in 14 years. The fund invests $5.3 billion, or 2.4 percent of its portfolio, in hedge funds, according to a statement.

“This is pretty unique,” said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors. “There is a significant opportunity for pension funds that have the right expertise and management to provide strong returns by doing this.”

Breton Hill principals had no comment on the Calpers investment, Ray Carroll, the fund’s chief investment officer, said in an e-mail.

Calpers began working with hedge funds in April 2002 and has an annualized return of almost 5.5 percent in that category, according to an Aug. 15 report by Craig Dandurand, who manages Calpers’ hedge fund portfolio. The S&P 500 index (SPX) gained 3.6 percent in the same period, Calpers spokesman Wayne Davis said in an e-mail.

New York Investment

The New York State Common Retirement Fund, the third- largest U.S. pension, provided $250 million in seed capital for an emerging-market hedge fund run by London-based Finisterre Capital LLP in January 2010.

“There’s been a very strong trend toward more pension funds investing in hedge funds and the average amount they invest is up sharply,” Steinbrugge said.

Pacheco said Calpers selected Breton Hill for its initial investment in a startup after an “extensive review” of the firm’s principals and investment process.

“Another key element in this review was determining that Breton Hill’s systems and infrastructure were well-prepared for institutional investment,” Pacheco said in an e-mail.

To contact the reporter on this story: James Nash in Sacramento at jnash24@bloomberg.net