Connecticut state Treasurer Denise L. Nappier plans to ask the investment advisory council of the Connecticut Retirement Plans & Trust Funds, Hartford, on January 14 to approve a new investment policy statement that will allow her to invest up to 8 percent of assets in alternative investments.
Approval by the panel is necessary before implementation of the policy. Nappier makes investment management decisions as sole trustee of the $21 billion combined pool of retirement and state trust fund assets.
In an interview, Nappier said that once the council approves the new investment guidelines, she and her staff will create an implementation plan for first-time investments in “opportunistic investment like hedge funds, infrastructure, commodities or any investment that doesn’t fit neatly into other asset classes.”
While not committing to an initial investment in hedge funds of funds, Nappier said she probably would look at this alternative area first because “it’s a good time to get into hedge fund of funds.“ She said institutional investors likely will be able to command increased portfolio transparency and fees concessions, given rocky returns, high redemptions and the impact of the Madoff scandal this year.
A 2006 asset allocation study recommended the addition of an alternative investment allocation, and in June 2008, the council approved asset allocations for the five main state retirement funds that include a zero to 8 percent investment range for alternative investments. As of September 30, the asset allocation of the combined funds was domestic stock, 30.7 percent; international stock, 21.8 percent; domestic fixed income, 24.3 percent; international fixed income, 4.2 percent; cash equivalents, 7.0 percent; private equity; 7.7 percent; and real estate, 4.3 percent. The combined funds’ assets have dropped 11 percent from the $23.6 billion they had as of September 30.