Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, headquarters is seen in Sacramento, California in this October 21, 2009 file photo. The California Public Employees' Retirement System, the largest U.S. pension fund, said on September 15, 2014, that it will pull all $4 billion it has invested in hedge funds because it finds them too costly and complicated.Max Whittaker/Reuters
Toronto asset manager Breton Hill Capital will be sideswiped as the California Public Employees Retirement System, the giant pension fund, pulls back from hedge funds, but Breton Hill has grown well beyond the original seed money it got from Calpers.
Calpers was an early investor in Breton Hill, seeding the fund with $100-million. Now, Calpers has decided it is getting out of hedge fund investing, and Breton Hill is part of the program that will be affected.
Calpers has about $4-billion (U.S.) in hedge funds, and its administrators have decided that such investments don't make sense in the context of a pension plan with almost $300-billion in assets. The program was too small and didn't offer meaningful diversification, Calpers has said.
Since getting its initial investment from Calpers, Breton Hill has expanded significantly. In addition to its macro fund (which is what Calpers is in) the firm has another big line of business. Breton Hill firm runs the assets for Purpose Investments, a growing exchange traded fund provider.
"We are currently a manager in the program that is being wound down," Breton Hill chief investment officer Ray Carroll confirmed. "We've had a great experience with Calpers – their original $100-million investment gave us the momentum to grow to over $700-million now."
Calpers disclosure showed that as of May 31, the Calpers documents show the pension plan had $218-million invested in Breton Hill's Eureka fund.
In the fiscal year that ended in 2013, Calpers paid about $12-million in fees to Breton Hill, according to the pension fund's disclosure. That included about $5.9-million in performance fees, suggesting that Breton Hill was generating strong positive returns. Mr. Carroll declined to provide returns numbers.
According to a profile earlier this year by Opalesque, which tracks the industry, Breton Hill's Master Fund returned 10.3 per cent in 2013 and 3.45 per cent in 2012. It was down 3.44 per cent in 2011, after launching in August of that year.