Aug. 27–Retirement funds of city and state cops and firefighters may soon be tied to some of the wildest get-rich investments hatched on Wall Street.<\/p>\n
William Thompson, the city controller, and Alan Hevesi, the state controller, are both considering investing a small part of the municipal workers’ pension funds into hedge funds, their spokesmen confirmed.<\/p>\n
“If there is a wild, wild West area in the investment world, this is it,” said Pat McGurn, a vice president at Institutional Shareholder Services. “These are highly unregulated entities that can basically put their money into anything.”<\/p>\n
Pension funds have been struggling to boost returns as the stock market faltered through the unsteady economy. Hedge funds may provide a way to improve their performance.<\/p>\n
“The events of the last few years have been extraordinary,” said Hevesi spokesman John Chartier, citing the slowing economy, terrorist attacks, and corporate scandals. “Our pension fund has taken a big hit.”<\/p>\n
Hedge funds, which hold speculative investments that don’t often need stocks to rise to boost profit, are generally available for wealthier investors.<\/p>\n
Such funds sometimes use derivatives and mathematical models, and are less tightly regulated than other types of investments.<\/p>\n
For the past year, the Securities and Exchange Commission has been reviewing hedge fund operations and expects to issue a report in the next few months.<\/p>\n
Officials from the controllers’ offices acknowledged the challenges of hedge fund investing.<\/p>\n
“These risks have to be carefully considered,” said Hevesi spokesman Chartier. “We have to determine whether the risks outweigh the benefits.”<\/p>\n
Neither the city nor the state has made a definitive decision about investing in hedge funds, which many other states and cities already do to boost returns in their retirement plans.<\/p>\n
New Jersey is considering investing a portion of its $62 billion pension fund assets in hedge funds to boost returns, Bloomberg News reported.<\/p>\n
Numerous hedge funds have provided higher returns for their investors than the typical stock or mutual fund, especially during down markets.<\/p>\n
“If pension funds had invested in hedge funds in the last few years, they would have been better off,” said Roy Smith, a professor at the NYU Stern School of Business. Smith estimates that hedge funds, which he said college endowments including Harvard and Princeton use, provided a return of around 10 percent during the recent bear market.<\/p>\n
“No one says you should take all your money and put it into one fund or a fund with a bad record,” Smith said. “As an asset class, hedge funds are an acceptable thing for pension funds to do.”<\/p>\n
—–<\/p>\n
To see more of the Daily News, or to subscribe to the newspaper, go to http:\/\/www.NYDailyNews.com<\/p>\n
(c) 2003, Daily News, New York. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n","protected":false},"excerpt":{"rendered":"
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