San Diego County’s employee pension fund received $48 million in two distributions from Amaranth Advisors late last year, far less than its original investment of $175 million in the failed hedge fund.
Brian White, chief executive officer for the San Diego County Employees Retirement Association, said he wasn’t told how much of the pension fund’s original cash placements remain with Amaranth, but said that it is unlikely to match an earlier estimate of $90 million.
“I think $90 million is a number that we would receive under the best of scenarios and circumstances,” he said.
White said as of the most recent distribution in late December, Amaranth told investors there would be additional distributions, “but we don’t know how many there will be or how much that will be.”
The remaining amount that could be returned depends on whether Amaranth takes gains or losses on the sale of its remaining assets, White said.
Connecticut-based Amaranth captured worldwide business headlines in September when its $9 billion hedge fund lost two-thirds of its value after making the wrong bet on the future price of natural gas.
Investors, including the county pension fund, attempted to withdraw their money, but were unable to do so because the fund locked up those investments.
After Amaranth failed to sell the fund or parts of it, fund managers determined to liquidate all assets and pay off investors.
SDCERA received $12.5 million at the end of November and $35.5 million at the end of December, White said.
White said the Amaranth liquidation and distribution process should be wrapped up by the end of May.
Sean Coffey, a county-hired attorney from Bernstein Litowitz Berger & Grossman in New York, said Amaranth has distributed two-thirds of the remaining $3 billion fund, and has about $1 billion remaining.
Coffey said fund managers may hold back some money for “unspecified obligations.”
Re-Evaluating Its Strategy
The Amaranth money returned to the county has not been assigned to any specific manager. The county’s pension fund managers haven’t decided where these will be reinvested, White said.
The county has been re-evaluating its overall investment strategy in the wake of the Amaranth meltdown, but apparently isn’t going to abandon investing in higher-risk funds.
White said the pension fund board will soon be interviewing for two new consultants, one for the entire $7.7 billion fund, and another who would advise the pension fund just on the money in its so-called Alpha Engine.
White said 20 percent of the fund, or $1.5 billion, was invested in its higher-risk Alpha Engine.
The pension board is still considering potential legal claims against Amaranth, but has yet to file action.
Despite the losses, the overall performance of the county pension fund has been exceptional. For the fiscal year ended June 30, the total return was 14.7 percent, above returns for major stock indexes, and above the fund’s target of 8.5 percent.