Connecticut looks for alternatives advisor

The $24.7bn pension system will issue separate requests-for-proposals for an alternatives consultant and a real estate consultant, with plans to award new contracts by the end of the year.

The State of Connecticut Retirement Plans and Trust Fund will launch a request-for-proposal process for an alternative investments consultant, according to materials released for its 9 May Investment Advisory Council meeting.

The pension system’s contract with consultant NEPC is set to expire 13 May, 2013. 

If the RFP process maintains its schedule, Connecticut will issue the RFP on 9 May. The $24.7 billion pension system will then spend the next seven months interviewing candidates, performing due diligence and negotiating contract terms. The contract is expected to be awarded 1 December, 2012, according to documents.  

Connecticut classifies alternatives as including opportunistic investments, absolute return strategies, real assets and new ideas/new products, according to its investment policy. The policy defines opportunistic investments as “strategies and structured products including synthetic investment instruments especially designed to address investor needs.”

Traditional private equity investments are handled through the state’s private investment fund, which is advised by Franklin Park. 

A spokesperson for the Connecticut State Treasurer’s office was unavailable for comment at press time. 

The pension system will also issue an RFP for a real estate portfolio consultant on a slightly faster timeline. That contract will be awarded 1 November, as the state’s contract with current real estate consultant The Townsend Group will expire 28 February, 2013.

In addition to announcing the RFPs, Connecticut will also consider a $50 million commitment to Marathon Asset Management’s $1.25 billion European Credit Opportunities Fund through its alternatives portfolio. The firm will target European investments in both liquid and illiquid securities and assets with a focus on bank debt, sovereign nation debt and distressed credit situations. The fund has a two-and-a-half year investment period, with a two year harvesting period, as well as two optional one-year extensions.

The fund has an unusual management fee breakdown, charging 1.25 percent to limited partners that are NEPC clients, which would benefit Connecticut. For other limited partners, the fund has a 1.75 percent of net asset value fee for commitments less than $25 million; a 1.5 percent fee for commitments between $25 million and $49 million and 1.25 percent for commitments of $50 million or more, according to documents.  

Marathon was founded in 1998 by Bruce Richards and Laurence Hanover. The firm has around $10 billion in capital under management and maintains offices in New York, London and Singapore. 

As of 31 March, Connecticut had a 2.2 percent allocation to alternatives, a 9.7 percent allocation to private investments (including private equity) and a 5.2 percent allocation to real estate.