The financial crisis left its mark on nearly all pension portfolios, and Metropolitan Government of Nashville and Davidson County was no exception. The Nashville, Tennessee-based public pension fund had an outsize equity allocation of 79 percent before shrinking by more than a quarter in the disastrous 2008 fiscal year, from $2.2 billion to $1.6 billion in assets.

As part of a change in direction, CIO Fadi BouSamra sought out so-called alternative fixed-income strategies to take advantage of dislocated credit markets. In late 2008, BouSamra won board approval to invest $25 million, or 1.5 percent of Nashville’s assets, in Pimco Distressed Mortgage Fund II, offered by Newport Beach, California-based bond giant Pacific Investment Management Co.

That was a smart move. Through November 30, 2012, the Pimco allocation had yielded a cumulative 173 percent. But BouSamra was just getting started. In 2009, Nashville bolstered its new alternative fixed-income portfolio by committing a total of $65 million to alternative investment manager Angelo, Gordon & Co. and credit specialist Marathon Asset Management. The two New York based firms were making use of a new federal government program: public-private investment partnerships. “We’re not an endowment, but we have a lot of opportunistic and risk-aware investments,” says BouSamra, who had become Nashville’s first investment professional when he joined the then-$1.1 billion fund in November 2003.

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