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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.
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.