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David Deutsch, chief investment officer of the San Diego County Employees Retirement Association, resigned today (March 5), as a result of bad hedge fund experiences and performance. Formerly, the county had 20 percent of the portfolio in hedge funds. That is now down to 14 percent, says Deutsch. In 2006, the county dropped $175 million from a failed investment in Amaranth Advisors, which traded natural gas contracts. It has gotten back $90 million and is trying to get the rest back through a lawsuit. Recently, it has come out that two money managers at WG Trading have been charged with fraud. SDCERA has $78 million in that investment, and tried to terminate late last year, but there is a waiting period before money can come out. "I think we can get the lion's share back," says Deutsch, who officially departs in two weeks. Also, the Composite International Fund of D.E. Shaw has set up so-called gates to slow down redemptions. SDCERA has money there. Three years ago, Deutsch and his bold approach were heroes in the investment community. Deutsch was hailed for putting the county's funds in innovative, daring "Alpha Engine" investments such as the hedge funds. "The Alpha Engine has been a very bad performer; I did not expect the hedge funds to be a disaster," says Deutsch.

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Comments

SurfPuppy619 March 5, 2009 @ 3:39 p.m.

NO!! pension money should be invested in a hedge fund or private equity firm.

That is the height of maleasance and irresponsibility.

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SurfPuppy619 March 5, 2009 @ 3:41 p.m.

I did not expect the hedge funds to be a disaster," says Deutsch.

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Famous last words from a loser who reaps all the benefits if the fund performs but sheds ALL liabilty onto others for losses.

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Don Bauder March 5, 2009 @ 7:40 p.m.

Response to post #1: I agree. Hedge funds and private equity funds have never been intelligent investments for pension funds. Best, Don Bauder

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Don Bauder March 5, 2009 @ 7:48 p.m.

Response to post #2: He did lose his job because he lost on inappropriate, highly speculative investments. But he didn't lose personal bucks unless he put his own money in those funds on the side. If he has money in SDCERA, he could lose to the extent that the hedge fund losses dent employees, but that's something we don't know. Best, Don Bauder

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bartleby88 March 6, 2009 @ 9:39 a.m.

Do these "investment" officers know the meaning of the phrase "HIGH RISK". My college professors are rolling over in their graves. Do investors realize that the sub-prime mortgage market is a "HIGH RISK" market? Why are these folks allowed to ruin the financial markets and expect the government bail them out? They should be in jail.

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Don Bauder March 6, 2009 @ 10:38 a.m.

Response to post #5: Just the fact that most pension funds have around 60 percent or more of their portfolios in common stocks is proof that the so-called fiduciaries have no concept of risk. They are a bunch of sheep. In the 1980s and 1990s, pension funds decided that stocks always go up, and moved their stock allocations from 30 or 40 percent to around 60. More recently, they added hedge funds, which not only invest in exotic instruments, but keep 20 percent of your profits, plus charging an additional fee. Actually, today's college professors helped lead the sheep to the abatoir by recommending these higher risk strategies. Best, Don Baudewr

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