Key Takeaways
- • San Francisco Employees' Retirement System (SFERS), a $25.5 billion pension fund, committed over $1.1 billion across hedge funds, private equity, real estate, and natural resources in 2018, with hedge funds capturing the majority of new allocations.
- • Hedge fund commitments included $300 million to ExodusPoint Partners Fund (multi-strategy), $200 million to East Lodge Capital Credit Opportunities Fund, and $300 million split between two Solus Alternative Asset Management distress debt funds, demonstrating SFERS's diversified hedge fund strategy.
- • SFERS's total hedge fund portfolio reached $3.1 billion as of August 31, 2018, following the board's February 2015 approval to build hedge fund exposure—a decision that had sparked internal controversy among board members over CIO William Coaker Jr.'s investment thesis.
- • Beyond hedge funds, SFERS allocated $100 million to venture capital funds (GGV Capital VII, GGV Capital VII Plus, and GGV Discovery) at its August board meeting, signaling continued diversification into growth-stage investments.
- • All manager commitments were approved during closed board sessions across four meetings between March and August 2018, reflecting SFERS's deliberate, phased approach to alternative asset allocation.
Summary
San Francisco's $25.5 billion public pension fund has deployed more than $1.1 billion in fresh capital across alternative investment vehicles, with hedge funds emerging as the primary beneficiary of the allocation strategy. The San Francisco Employees' Retirement System (SFERS) board approved the commitments through a series of closed-session votes spanning March through August 2018, according to board action records reviewed by CIO.
The hedge fund allocation strategy reflects SFERS's commitment to multi-strategy and distressed credit exposure. In August, the system committed $300 million to ExodusPoint Partners Fund, a multi-strategy hedge fund managed by Exodus Point Capital Partners. An additional $300 million was allocated in April to two distressed debt-focused funds managed by Solus Alternative Asset Management: the Solus Long-Term Opportunities Evergreen Fund and Solus Series Domestic Fund. East Lodge Capital received $200 million for its Credit Opportunities Fund in June, supplemented by a $25 million special investment in the East Lodge Credit Capital Partnership, bringing total East Lodge commitments to $225 million.
These commitments underscore SFERS's systematic expansion of hedge fund exposure since the board's February 2015 decision to establish a hedge fund portfolio—a vote that had generated significant internal debate among board members regarding then-Chief Investment Officer William Coaker Jr.'s alternative asset strategy. As of August 31, 2018, SFERS's hedge fund holdings totaled $3.1 billion, representing a substantial build-out from the program's inception.
Beyond hedge funds, SFERS diversified its alternative allocation with a $100 million commitment to three venture capital funds managed by GGV Capital (GGV Capital VII, GGV Capital VII Plus, and GGV Discovery) in August. This commitment signals the pension system's intention to maintain exposure across multiple alternative asset classes while building depth in its core hedge fund strategy. The measured, board-approved approach across multiple meetings demonstrates SFERS's disciplined capital deployment methodology for alternative investments.
The hedge fund allocation strategy reflects SFERS's commitment to multi-strategy and distressed credit exposure. In August, the system committed $300 million to ExodusPoint Partners Fund, a multi-strategy hedge fund managed by Exodus Point Capital Partners. An additional $300 million was allocated in April to two distressed debt-focused funds managed by Solus Alternative Asset Management: the Solus Long-Term Opportunities Evergreen Fund and Solus Series Domestic Fund. East Lodge Capital received $200 million for its Credit Opportunities Fund in June, supplemented by a $25 million special investment in the East Lodge Credit Capital Partnership, bringing total East Lodge commitments to $225 million.
These commitments underscore SFERS's systematic expansion of hedge fund exposure since the board's February 2015 decision to establish a hedge fund portfolio—a vote that had generated significant internal debate among board members regarding then-Chief Investment Officer William Coaker Jr.'s alternative asset strategy. As of August 31, 2018, SFERS's hedge fund holdings totaled $3.1 billion, representing a substantial build-out from the program's inception.
Beyond hedge funds, SFERS diversified its alternative allocation with a $100 million commitment to three venture capital funds managed by GGV Capital (GGV Capital VII, GGV Capital VII Plus, and GGV Discovery) in August. This commitment signals the pension system's intention to maintain exposure across multiple alternative asset classes while building depth in its core hedge fund strategy. The measured, board-approved approach across multiple meetings demonstrates SFERS's disciplined capital deployment methodology for alternative investments.
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