The chairman of San Francisco’s pension fund is proposing a smaller mix of hedge funds than previously discussed, the latest retirement system to rethink its approach to those investments in the wake of a retreat by the largest public pension in the US.

The new suggestion made by San Francisco Employees' Retirement System chairman Victor Makras, according to a memo reviewed by The Wall Street Journal, is to allocate as much as 3% of the portfolio in hedge funds-down from a prior staff recommendation of 15%.