The Los Angeles Water and Power Employees’ retirement and health plans are close to finalising the transition of their combined $710.7m hedge fund programmes to a fund of one managed by Blackstone.

The $12bn retirement plan and $2.1bn health plan are liquidating the last of their holdings in a FoHF managed by Morgan Stanley Alternative Investment Partners.

At one time Morgan Stanley managed more than half of the hedge fund portfolio for each plan. GAM managed the other half.

The plans’ consultant, RVK, placed Morgan Stanley on watch in March 2016 over performance concerns.

The following month trustees opted to adopt a fund of one structure for the hedge fund programme.

Staff began a search for a fund of one manager, and Blackstone was chosen in April 2017.

Once contract negotiations were finalised in August 2017, Blackstone was funded with $487m – $415m from the retirement plan and $72m from the health plan – and liquidation of GAM and Morgan Stanley commenced.

Trustees also increased the target allocations to hedge funds from 2% to 5% for both plans.

As the GAM and Morgan Stanley funds have been liquidated, Blackstone’s allocation has steadily increased.

As of 31 December 2017, Blackstone managed $463.8m for the retirement plan and $80m for the health plan.

GAM managed $47m for the retirement plan and $7.6m for the health plan while Morgan Stanley managed $78.4m for the retirement plan and $12.7m for the health plan.

As of 31 October 2018, the California allocator had completely redeemed from GAM, with Blackstone managing $608.3m for the retirement plan and $99m for the health plan.

Blackstone’s Hope Street fund is a custom vehicle that charges a 0.6% management fee with a 12% performance fee over a 4.4% hurdle.

As of 30 September it allocated 41.7% to credit, 29.6% to equities, 13.9% to macro, 7.4% to multi-strategy, 5.8% to special situations and 1.6% to cash/other.

LA pension close to completing Blackstone fund-of-one move on HFM InvestHedge.