The $850 million Ohio Highway Patrol Retirement System punches above its weight when it comes to getting access to the best alternative investments. Richard Curtis, executive director, conducted due diligence on hedge funds to decide which ones he wanted to invest in, ignoring their often prohibitive investment minimums. “We established an all-star list of hedge funds—ones that had repeatable success, good reporting,” said Curtis. “Unfortunately, many of these are closed to small investors.” The plan subsequently sought out funds of funds with exposure to its preferred managers. Farallon Capital Management impressed the fund with its strong operations and performance, so the plan picked Evanston Capital Management, which includes Farallon in its Weatherlow Fund.
Going beyond vanilla strategies, the plan invested in a Lehman Brothers fund of fixed-income hedge funds and added Protégé Partners, an emerging manager fund of hedge funds. On the private equity side, the plan brought on Credit Suisse, Pantheon Ventures and Kayne Anderson Rudnick Investment Management, which invests in secondary stage oil. “Ohio Highway Patrol made a foray into the alternatives category in a way that was significant and unique, and at a time when there was a lot of criticism of the asset class,” said Thomas Hartland, president of Hartland & Co., the plan’s consultant. “A lot of what they’ve been doing this year is quite unusual for plans that size.”
Ohio Highway also hired PanAgora Asset Management, Mellon Capital Management and PIMCO for global tactical asset allocation mandates. “These three managers have very different philosophies,” said Curtis. “We selected them so that, depending on market conditions, two will always be doing very well while one may not.”
The changes should increase the fund’s gross expected return to 9.3% from 8.5%, while reducing its standard deviation to 8.4% from 12.2%.