Billionaire hedge fund investor Daniel Loeb will be losing Rhode Island as a client after the state's pension fund found his Third Point too risky for its taste and decided to pull out all of its money.
The state's Investment Commission, which directs how its $8 billion pension fund is invested, voted unanimously on Monday to redeem $74.3 million from Third Point, Joy Fox, a spokeswoman for Rhode Island Treasurer Gina Raimondo, said on Friday. The money will be returned on March 31.
"The purpose of the hedge fund portfolio is to reduce the (pension) fund's overall sensitivity to equity market moves," Fox told Reuters in an email.
"This fund has the highest equity market sensitivity within the state's hedge fund allocation. With this vote, the commission is further reducing the beta risk within this portion of the portfolio."
For Loeb's $14 billion fund, long considered one of the industry's best performers, Rhode Island's investment is small and will not hurt dramatically.
But hedge fund managers do not like losing pension funds as clients because their departure could send a signal about overall attractiveness to other institutional clients.
(Read more: Third Point takes stake in Dow)
Loeb performed well for Rhode Island last year, earning a 24.71 percent return that ranked Third Point as the state's best performing hedge fund in 2013, according to state documents. Overall the pension fund returned 14.01 percent for the year.
Rhode Island first put $50 million with Loeb's New York-based fund in 2012 and the fund's strong performance in 2012 and in 2013 helped it earn a return of 49 percent on that investment alone.
"The Commission decided to lock in gains of $24.3 million by redeeming from Third Point, and reallocate about $20 million to Samlyn, another equity hedge fund," Fox said in the email.
A Third Point spokeswoman underscored what Loeb had done for Rhode Island's teachers and other retirees.
"Third Point is pleased that Rhode Island's pensioners earned 49 percent, net of fees, over the two years they invested with us," she said.
(Read more: Loeb takes out new position in Hertz, sources say)