ExodusPoint Capital Management, the biggest-ever hedge fund start-up, is getting an initial $175m allocation from a pension fund with one of the fastest growing hedge fund allocations in the country.

Trustees for the $25.6bn San Francisco City and County Employees’ Retirement System (SFERS) approved the allocation of up to $300m at their meeting on 8 August. The mandate is part of SFERS’ absolute return programme, specifically the San Francisco Absolute Return Investors II fund, created in partnership with Blackstone Alternative Asset Management (Baam).

SFARI II, approved in November 2017, is the second phase of the pension fund’s rapid absolute return programme build-out. The pension fund’s absolute return portfolio has grown from nothing in 2014 to about $3.1bn as of the end of August. Much of that growth occurred in the just first eight months of 2018, during which time the absolute return programme’s assets increased by 379% from $652.5m at the end of 2017.

SFERS’ initial $175m investment in the ExodusPoint Partners Fund closed on 1 September.

ExodusPoint expects to be managing some $8bn by October and based on future commitments could manage $12bn by next year. The multi-strategy firm launched in June with $4.35bn in commitments. ExodusPoint was founded by ex-Millennium Management executive Michael Gelband, who publicly split with Millennium founder Israel Englander in 2017 and hired away some Millennium traders.

SFERS also could invest up to $200m in East Lodge Capital’s East Lodge Credit Opportunities Fund, plus another $25m in a special investment partnership with the firm. Trustees approved that allocation at their meeting in June. The allocation is coming from the SFARI II programme.

East Lodge was founded in 2013 by former CQS ABS head Alistair Lumsden. The Credit Opportunities Fund focuses on investments in structured credit and European direct lending markets, according to East Lodge Capital’s website.

The SFARI II programme includes two share classes – an A share class that’s allocated to Baam to invest in managers on a discretionary basis and a B share class that SFERS staff invests directly with managers in consultation with Baam and consultant NEPC. The ExodusPoint and East Lodge mandates are part of the SFARI II B share class.

The continued expansion of SFERS’ absolute return programme is part of a two-phase process that will see it reach a target allocation of 15% of assets and eventually shift to a two-thirds internally-managed portfolio with one-third managed by Baam. Currently Baam invests about two-thirds of SFERS’ absolute return programme.

ExodusPoint lands San Francisco ticket on HFM InvestHedge.