Featured Allocator | Spencer Comeaux of The Employees Retirement System of Texas
EAA: How did you find your way to being an LP?
Spencer: It started with a few different conversations. When I was in high school, I had the chance to hear some of my dad’s friends talk about how they invested in businesses and real estate. What struck me wasn’t the returns. It was a throwaway line one of them said that it doesn’t matter what the S&P 500 is doing. The idea of making money regardless of what equity markets were doing really fired me up. This notion got me started on a path of figuring out how to build the perfect portfolio, particularly one that generated consistent, decent returns across different environments without being reliant on any broader market.
That obsession got me reading. I read The Warren Buffett Way, Hedge Fund Market Wizards, The Man Who Solved the Market, and So You Want to Start a Hedge Fund. That last one gave me both sides of the same coin, the LP and the GP perspective, and cemented my belief that winning in investing isn’t about picking the best stocks. It’s about building the best portfolio.
Getting into that world was a different challenge. I went to school in Louisiana with no direct path into finance, so I did the only thing I could think of. I applied to over 400 internships, cold emailing my way to direct contacts at firm after firm until two interviews came back. One of them was the Texas Permanent School Fund. I didn’t know it at the time, but I ended up doing exactly what I always wanted, just in a way I didn’t know existed. I wasn’t building a portfolio of ideas at a hedge fund. I was building a portfolio of hedge funds.
That internship taught me what real due diligence looks like, how to evaluate a strategy on a standalone basis and in the context of a broader portfolio, and how to think about each fund as a building block toward something low beta and durable. Now I work at the Employees Retirement System of Texas, helping oversee a $2.7 billion hedge fund portfolio, still obsessed with roughly the same question I started with: how do you build a portfolio where returns are driven by idiosyncratic risk rather than systematic exposure?
EAA: Tell us more about your organization. What’s its origin story and core mission?
Spencer: The Employees Retirement System of Texas was established in 1947 to provide retirement, health, and related benefits to Texas state employees and their families. Today ERS manages approximately $45 billion in total assets on behalf of more than 260,000 active employees, retirees, and beneficiaries across the state. The mission is straightforward, but the stakes are real. We are responsible for the retirement security of the people who keep Texas running every day, including state agency employees, certified peace officers, parole officers, custodial officers, district attorneys, and judges. Every investment decision we make ultimately connects back to that obligation.
EAA: What are you currently looking to invest in? / What are you excited about?
Spencer: My coverage is rooted in event-driven strategies, but my day-to-day work spans the full hedge fund universe, and right now I am actively looking to add a soft catalyst event-driven manager to our portfolio. Our existing event-driven exposure is concentrated in hard catalyst managers and given how attractive the current environment is across mergers, spinouts, and special situations, adding a soft catalyst name feels like a natural next step that gives us a different flavor of event-driven exposure.
What excites me most about this job is how much harder it is getting. The information advantage that historically drove alpha in public markets has compressed over the last decade, and the combination of AI, accessibility of information, and an ever-growing universe of sophisticated risk takers means that true idiosyncratic alpha has slowly become more rare and more valuable. That reality is going to force allocators to develop a deeper level of expertise and pattern recognition, and I find that genuinely exciting. I also think hedge funds are particularly well positioned right now as many institutional allocators find themselves overweight illiquid private market exposures, which creates a real opportunity for liquid, transparent, and dynamically managed strategies to be the beneficiary of new capital flows.
EAA: What do you want to do after this?
Spencer: Long term, I want to be the lead for a hedge fund program at an institution whose mission I fully align with. Hedge funds are my passion and where my expertise is being built, but I also want to develop fluency across asset classes over time because I think you cannot truly understand a hedge fund portfolio without understanding how it interacts with everything else in the broader portfolio. My goal is to eventually sit at a seat where I am the primary decision maker on hedge funds while also contributing meaningfully to broader portfolio construction conversations.
EAA: How do you think about outperforming? How do you think about selecting managers or building portfolios?
Spencer: Outperformance is always relative. For the hedge fund program at ERS, our benchmark is an index of low beta risk mitigating hedge funds and we generally target beating this benchmark on a rolling one-, three-, and five-year lookback. Personally, I consider performing better than the S&P 500 on a risk adjusted basis to terms of true outperformance. This is not a return maximization exercise, it is a capital preservation exercise with selective upside, and Sharpe and Sortino are the metrics I care most about. The managers I am most excited about are the ones who can demonstrate that discipline consistently across multiple market cycles.
EAA: What’s something you believe about investing that most other LPs would disagree with?
Spencer: I think the industry is too obsessed with fees, particularly when performance is strong. All else equal, I would rather pay a 2 and 30 to a manager annualizing 18% than pay a 1.5 and 15 to a manager annualizing 12%. The math is not complicated, but the institutional pressure to negotiate fees down has created a culture where some allocators would rather tout that they got a fee break than tout that they got capacity in a fund with above average returns. If I have identified a manager that is capable of consistently generating above average returns relative to peers, I am happy to pay above average fees relative to peers.
EAA: When you meet a new GP, what are you subconsciously looking for in the first 10 minutes?
Spencer: I quickly figure out if they are looking to sell to me or partner with me. The difference is usually obvious within the first few minutes. A GP who walks in and goes straight to slide one of their marketing decks is selling. A GP who opens by asking about updates on our portfolio, what strategies we are looking at closely, and what questions I have about their fund before they begin their presentation is partnering. A meeting revolving exclusively around a marketing deck signal selling, a collaborative conversation between the GP and LP signals partnering. Additionally, it is also the LP’s responsibility to review materials and prepare questions before each meeting. A true partnership is always a two-way street.
EAA: What’s a hill you’re willing to die on as an investor?
Spencer: Relationship management can be a source of alpha:
The best hedge funds in the world are often close to new capital due to impressive performance. When they begin to think about reopening, the LPs who get that call are the ones who stayed in front of the manager, learned the book intimately, and communicated their own portfolio’s needs clearly and consistently over time. My job is not to wait for a great manager to knock on my door. It is to make sure that when the best hedge funds reopen, they think of me first because I have been intentional, consistent, and genuinely interested long before they had capacity to offer. They want me because I know their fund well enough to move fast and remain a partner for the long-term.
EAA: If you could live anywhere, where would you live?
Spencer: If I could live anywhere in the world, it would be Lugano, Switzerland. You are surrounded by the most incredible scenery, amazing hikes, and some of the best driving roads in the world. You’re also a short train ride away from some incredible food and wine in Italy and France. A close second would be New Orleans, Louisiana. You can never do Mardi Gras too many times!
EAA: What’s the best way to get in touch with you?
Spencer: Email and LinkedIn are great ways to get in touch with me. A better way is to say hello to me at an EAA event!