The El Camino Hospital investment committee is eyeing several changes to its hedge fund portfolio, including a $5m initial allocation to Carlson Capital.
The board overseeing the $265m surplus cash portfolio is considering investing in the Black Diamond Arbitrage Fund, which would sit within its relative value portfolio.
The investment would be funded by excess cash.
Clint Carlson’s Dallas-based firm is a “well-regarded member of the hedge fund industry”, investment consultant Pavilion Advisory Group wrote in its recommendation to El Camino, which was discussed at a 13 August meeting.
Black Diamond Arbitrage runs an event-driven strategy targeting the securities of companies facing a major corporate event.
“Throughout the fund’s long track record, it has exhibited low beta to traditional equity and credit markets and notably has not experienced a calendar year with negative performance, to date,” Pavilion wrote.
“We believe the fund is a good candidate for investors looking for a merger arbitrage/special situations fund with very low market correlation run by a seasoned investment team and where the firm’s principal and employees have significant (10%) capital invested alongside external investors.”
Carlson manages $4.5bn in the event-driven strategy. Black Diamond Arbitrage was up 3.8% for the year through 30 July and returned 6.5% last year, according to performance data seen by HFM InvestHedge.
Pavilion is also reviewing El Camino’s exposures to the BlackRock 32 Capital Fund and Tiger Eye Fund and will work with staff to approve and implement any required changes, the latest board documents said, although the proposed changes were not detailed.
Mountain View, California-based El Camino had $7.9m invested in long/short US equity-focused Tiger Eye and $6.2m in the quant market-neutral BlackRock fund as of 30 June.
The hospital surplus cash plan, which has $135m dedicated to direct hedge funds, invested $4m in Moore Macro Managers Fund on 1 July, bringing its total allocation to Louis Bacon’s hedge fund to $10.7m.
That follows allocations of $3m, $2m and $5m to Bloom Tree Offshore Fund, Indus Japan Fund and Stone Milliner Macro Fund respectively, made on 1 May.
Pavilion also told El Camino at its latest meeting that it had put Lighthouse Investment Partners on watch, following the completion of the Florida FoHF’s acquisition of $8bn Mesirow Advanced Strategies (MAS) in July.
The consultant noted that although early conversations about the acquisition indicated that it made sense, a number of uncertainties around the integration process remain.
In May, HFM InvestHedge revealed that MAS senior executive duo Tom Macina and Greg Fedorinchik were not making the move to $11bn Lighthouse, although most of investment, client and operations staff were expected to do so.
The hospital’s surplus cash plan has $16.5m invested in Lighthouse and another $15.9m invested in Pointer Capital.
El Camino did not respond to requests for comment.
El Camino Hospital eyeing Carlson Capital ticket on HFM InvestHedge.