Hedge-Fund Bets Give Boost to Huge Texas Teachers’ Pension

Key Takeaways:

  1. While stocks and bonds have been battered this year, bets on hedge funds have paid off for the Teacher Retirement System of Texas.
  2. The steadiness of hedge funds has proven valuable for the pension by providing returns uncorrelated to stock markets.
  3. “Hedge funds looked attractive, given investors’ expectations for ongoing volatility and the potential gains from funds specializing in trading distressed debt if the economy slows.”

In Texas, hedge funds invest in opportunities for retirees to help provide retirement income and create financial stability and peace of mind. A recent Wall Street Journal article details the returns generated by the steady growth of the Teacher Retirement System of Texas as we, as the added value hedge funds, have provided for the pension fund. Key excerpts can be found below.

“Mr. West said the pension’s hedge-fund investments added value by providing returns uncorrelated to stock markets. He also said hedge funds were proving valuable by providing cash from redemptions at a time when generating liquidity from investments at anything other than depressed prices has been difficult.”

“The pension redeemed roughly $1.4 billion from hedge funds in calendar year 2022. It expects some $500 million in cash in January from year-end hedge-fund redemptions. The redemptions, mainly aimed at keeping hedge funds to about 10% of the pension’s portfolio as other assets lost value, covered many retired teachers’ pension checks.”