Thursday, April 16, 2020

California Public Employees’ Retirement System board member says "the board was never told about the elimination of [a strategy] designed to protect portfolios against market crashes"

Institutional Investor:

Margaret Brown, an all-member representative for CalPERS, posted on her Facebook page on Thursday that the board was never told about the elimination of one of two tail-hedge strategies, which are designed to protect portfolios against market crashes. And meeting minutes show that Brown asked CalPERS CIO Ben Meng about the strategy at the pension’s March meeting.

“Ben, can you tell me how our left-tail investments are performing?” Brown asked, according to the meeting minutes. “Are they performing the way we thought they would in this economic downturn?”

In response, Meng said: “Yes, for any left-tail risk hedging strategy you're referring to, they should perform well in this kind of a down market, as they were exactly designed to do. And from what we know are most of these strategies are performing as anticipated.”

On Facebook, Brown pointed out that Meng failed to mention at the time that the pension had already unwound those positions.
Via Matt Levine's newsletter.