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OCERS EXTRA

 

Thursday, January 28, 2016

On January 19, 2016, during the regular Board of Retirement meeting, outgoing Chair Chuck Packard honored Board Members who had chaired various committees throughout 2015. Pictured from left, Shari Freidenrich, Roger Hilton, Chuck Packard, Chris Prevatt and David Ball.

 

 

January 27, 2016 Investment Committee Meeting update

At its regular meeting on Wednesday, January 27, 2016, the Investment Committee took several actions related to OCERS' $12 billion portfolio. The actions were related to preliminary approvals made by the Investment Committee in November 2015.

 

  1. The Committee approved an investment of $100 million to Cross Ocean Partners (European Special Situations Fund II), pending final due diligence and negotiations of contract terms.

  2. The Investment Committee approved an investment of $110 million to Alcentra (Clareant European Direct Lending Fund II) pending final due diligence and negotiation of contract terms.

 

Investment Fee Policy update

In other action taken on January 27, the Committee approved an amendment to its Fee Policy to encourage managers of alternative investments (such as hedge funds and private equity partners) to establish hurdles for their performance-based fees. OCERS is seeking to surmount the widespread industry practice of collecting "carried interest" for investment performance that falls below market returns or a reasonable bogey. In today's low-return environment, OCERS' CIO and trustees believe public pension funds should not be paying such fees unless managers actually deliver on their performance claims. Under the new policy, managers lacking performance-fee hurdles will be placed on Watch status when performance falls below their bogey and their peer group. Managers seeking new business at OCERS without a fee hurdle will have to present against one that does, in finals competition.

 

"If beta (the passive market return) is widely agreed to be a commodity in the investment industry, then why should we pay for returns between zero and beta?" asks Girard Miller, OCERS' Chief Investment Officer. "This is all about alignment of interests - and challenging the costs of alternative strategies in a low-return environment. 'Two and twenty' (the traditional hedge fund fee formula) makes absolutely no sense in today's institutional marketplace."

 

The next regular Board of Retirement meeting will be held at 9 a.m. on Monday, February 16, 2016; the next Investment Committee meeting will be held at 9 a.m. on Wednesday, February 24, 2016.

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