Here are some follow ups on county hedge fund explosion:
- Gene Cubbison from our news partners at NBC 7/39 has this report up.
- It appears as though the county’s pension had $76 million invested with WG Trading as of July 2008, but it previously had quite a bit more. Last year, the county’s pension reported having more than $145 million invested with WG. Not clear whether this money was lost in the downturn or presciently withdrawn from the fund before this happened. We’ll get back to you.
- Here’s the link to the U.S. Commodity Futures Trading Commission’s press release on the charges it filed today. Money paragraph:
According to CFTC Acting Director of Enforcement Stephen J. Obie, “The coordinated efforts of multiple federal regulators resulted in uncovering and ending this egregious fraud. Defendants treated investor money— some of which came from a public pension fund— as their own piggy bank to lavish themselves with expensive gifts. The public can rest assured that their nation’s commodity futures regulator is pursuing every avenue to locate and eliminate crooked commodity professionals.”
The CFTC complaint alleges that, from at least 1996 to the present, Walsh and Greenwood fraudulently solicited approximately $1.3 billion from individuals and entities through Westridge Capital Management, WG Trading Investors, LP, and other entities. The complaint charges that the defendants defrauded victims by falsely depicting that all pool participants’ funds would be employed in a single investment strategy that consisted of index arbitrage. However, pool participants’ funds were transferred to another entity from which Walsh and Greenwood siphoned funds, according to the complaint.
- Seems the county pension’s investment guru, David Deutsch, had a particular fondness for this hedge Fund. From a 2006 profile of Deutsch in Alpha magazine:
[Deutsch] has created what is in essence his own proprietary trading desk through San Diego County’s relationship with WG Trading Co. The Greenwich, Connecticut-based broker-dealer does index arbitrage for the pension fund, eliminating the costly performance fees the county would incur were it to pursue such a strategy using a hedge fund. San Diego’s partnership with WG is part of Deutsch’s master plan to separate alpha and beta to increase his investment choices.
- Finally, a thought: The last time we dealt with the county and its hedge fund mess — when the hedge fund Amaranth lost the county’s money — Deutsch told his bosses at the retirement system that they should expect at least one of these major hedge fund losses a year. Since I didn’t hear about one last year, it actually means, I guess, that he’s doing better than expected.
More to come.