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City pension board creates 'strategic' fund

The board will sell $40 million in domestic stocks and look for "tactical" ways to protect itself from future downturns.

The city pension board voted today to sell $40 million in domestic stocks and use the money for "strategic" and "tactical" investments, designed to protect the $3.8 billion fund from sudden downturns like the one that's currently roiling world markets.

Over the last 30 years, the city fund has relied on selected money managers to handle different pieces of its portfolio.  But this new $40 million fund will be managed by the board's recently-hired chief investment officer, Sumit Handa, with close supervision from four pension board members, including city finance director Rob Dubow and city controller Alan Butkovitz, who proposed the new arrangements.

Earlier this week, Dubow estimated the pension fund's recent market losses at $120 million, but that was three volatile days ago. He said he did not have updated figures.

Handa told board members that he'd left behind his crystal ball to predict future market gyrations.  But if he'd had money to invest toward the end of July, he said, with signs of a weakening U. S. economy and uncertainty over resolution of the national debt crisis, the pension board could have protected itself by buying put options that would have multiplied rapidly with a market downturn.

The $40 million will come from the liquidated domestic stock portfolios of two investment managers the pension fund had already decided to phase out – Turner Investment Partners and Penn Capital Management.  The pension fund assets managed by the two firms totaled $50.7 million at the end of June but stood at $40.3 million today,  according to the city fund's executive director, Francis Bielli.

Two board members, Carol Stukes and Veronica Pankey,  representing city workers in AFSCME District Councils 47 and 33, respectively, voted against creation of the new fund. They expressed concern that the board was over-reacting to the recent market turmoil and should continue to rely on the best judgments of their money managers.