Side Pockets anyone?

December 2005

These adjustments are designed to provide additional comfort to investors. First, we are committing that no side pocket investment will have a duration of greater than 10 years.

For those that were surprised by side pockets (in 2007 and 2008), I would simply suggest they look back over the past 10 years. Anytime a manager is confronted with large redemptions in a "long term" investment strategy (i.e. credit, private equity, real estate), they will either suspend redemptions, side pocket or distribute securities in kind.

Unfortunately, many allocators preferred to simply ignore this possibility (risk) as "improbable."