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Alternative Market Briefing

Memphis pension eyes hedge funds

Tuesday, August 05, 2014

Bailey McCann, Opalesque New York:

The City of Memphis pension system is considering a restructure of its equities and bonds portfolio in order to make commitments to alternatives, according to meeting documents released this week. If approved, the new investment strategy would include investments in hedge funds, private equity, real estate and emerging market equities. The restructure recommendation comes from the pension's financial consultant, Segal Rogerscasey.

The pension has a target return of 7.5%, which it has had difficulty achieving consistently with a more traditional portfolio. Memphis, like other cities, has fallen behind on making the full pension payments required to keep the system fully funded and now owes more to retirees than it has.

A report in the Memphis Commercial Appeal notes that the unfunded liabilities of the pension system has already influenced decisions by city officials to cut most retiree health care subsidies. Low interest rates have also caused drag on the bond portfolio. Some city officials worry, however, that the high fees associated with alternative investments could end up being too great a cost for the city.

A number of pension systems have been moving toward alternatives in their allocations as the post-crisis economy makes it tough for tr......................

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