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US teachers’ fund leaves Bermuda investment

The Bermuda-based Aeolus Keystone fund, which specialises in property catastrophe insurance coverage, is about to lose a key client as a result of Monday’s vote of the Arkansas Teacher Retirement System's trustees.

After advice from a consultant, the trustees of the $21-billion fund voted to authorise the system to wind down its $185-million investment in Aeolus.

The opt-out advice came from P J Kelly of Aon Hewitt Investment Consulting, the system's general investment consultant.

Aon Hewitt recommended that the system decline renewal of the January and mid-year Aeolus Keystone investment funds and allow the system's investment exposure in the funds to wind down, which Kelly expected to happen next summer.

The Arkansas Democrat Gazette reported that Kelly wrote to three system officials last month: "Aon's opinion is that Aeolus is taking on unnecessary risk to achieve their desired returns, which was exemplified most recently by their outsize losses from Hurricane Ida."

The message added: "Additional concerns surround the weak performance and below market terms, particularly related to higher than market fees and lack of a high-water mark."

Kelly’s message said that Aon Hewitt continues to believe that exposure to the insurance-linked securities market is an attractive investment for the system's portfolio and that it will continue to monitor the landscape for potential investments that complement the recently approved Pillar Juniperus Opportunity Fund.

Last month, the trustees authorised an investment of up to $95 million in that fund, which is managed by Bermuda-based Pillar Capital Management Limited. That fund invests in insurance-linked securities.

The Teacher Retirement System is the Arkansas state government's largest such agency, with more than 100,000 working and retired members.

Its investments are valued at roughly $21.2 billion.

The Arkansas Teacher Retirement System is the largest such state government agency, with more than 100,000 working and retired members. Its investments are valued at more than $21 billion.

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Published October 22, 2021 at 7:42 am (Updated October 22, 2021 at 7:42 am)

US teachers’ fund leaves Bermuda investment

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