TX Teacher Pension Buys Stake in Hedge Fund

Excerpt from an article in

The New York Times

Tuesday, March 06, 2012

Texas Teacher Pension Buys Stake in Bridgewater Hedge Fund

By AZAM AHMED

The Teacher Retirement System of Texas just went from hedge fund investor to hedge fund owner.

Last month, the Texas pension took a $250 million stake in Bridgewater Associates, the giant money manager. Now, rather than plowing money into specific portfolios, it can claim a piece of the whole operation.

It is an unusual move for a pension. By investing directly in Bridgewater, the Teacher Retirement System of Texas can share in the upside return without paying the high costs. But the large state pension is also betting on the long-term viability of a firm whose fortunes are associated with a single enigmatic founder, Ray Dalio.

"They are essentially making a double bet in this particular firm," said Elizabeth B. Nesvold, managing partner at Silver Lane, an investment banking adviser that specializes in asset managers. "When you think about the downside, you get a double whammy."

Unlike many businesses, hedge funds are often closely linked to one person who has driven their success. SAC Capital has Steven A. Cohen; Pershing Square Capital Management, William A. Ackman.

But as the largest hedge funds mature, many founders want to sell stakes in the businesses they have built. In the last year, firms like Millennium Management, started by Israel Englander, and the Rock Creek Group have sought outside investors.

In addition to handsome paydays, hedge funds want to diversify their ownership base, in part to fund a more stable supply of capital.