Canadian Pension Seeks First Hedge Fund Managers

Date: Friday, September 8, 2006
Author: Alternative Investment News

The Toronto Transit Commission, with CAD3.1 billion in total assets, will take its first hedge fund stake and plans to hire at least two fund-of-hedge-funds managers for mandates worth CAD50 million each. It plans to invest in portable alpha via funds-of-funds in order to enhance returns, said John Cannell, treasurer. The move follows a recent asset allocation review to diversify its asset allocation. "We don't consider property to be an alternative, so it was time to look at that [alternatives]." The scheme has increased its property allocation to 5% from 3% in April and hedge funds were next on the list.

The commission is accepting proposals and expects to hire managers by year-end or early next year. There is a possibility of a third manager or an increase of the new managers' portfolios next year, Cannell noted. To fund the move the transit scheme will likely cut its fixed-income portfolio.

Brockhouse Cooper will assist with the manager selection. The commission invests 40% in fixed income and cash, 30% in Canadian equity, 15% to U.S. equity and 15% in international (ex-U.S.) equity. Its balanced managers are Philips, Hager & North, Jarislowsky Fraser and Letco, Brosseau & Associates. Barclays Global Investors is its passive manager, while InTech, Reed Conner & Birdwell and Wellington Management run equity. UBS Brinson & Brandis manages fixed income, while Redcliff Realty Management handles property.