The $4.7 billion Local Government Superannuation scheme (LGS Super) has reallocated the $450 million it began pulling from hedge fund-of-funds in the Chifley Wholesale Trust in February.

LGS Super redeemed the capital – invested through the Chifley trust in an assortment of hedge fund-of-fund managers including Financial Risk Management, Warakirri Asset Management, Barclays Global Investors’ Alpex fund, BlackRock and MM&E Capital – because it was uncomfortable with the structure of the investment vehicles, according to Peter Lambert, chief executive officer of the fund.

“We are still interested in absolute return structures, but are unlikely to consider fund-of-fund arrangements where there can be difficulty understanding underlying managers,” Lambert said.

“We’re not adverse to hedge funds – just some of the structures.”

LGSS Super began investing the redeemed capital in credit funds during recent months. A $200 million allocation to a Macquarie fund investing in high grade domestic credit has been followed by a similarly sized mandate to BlackRock, bound for international investment grade credit and mortgage-backed securities markets.

Any residual capital will be “sprinkled” across other parts of the portfolio, Lambert said.

The redemption significantly reduced the proportion of LGS Super’s portfolio invested in alternative assets. However it maintains a $300 million allocation to private equity through Quentin Ayers and $50 million to a Macquarie ‘clean tech’ fund.