Risky investments cost the county millions

KPBS | By KPBS Public Broadcasting

Published September 25, 2006 at 7:28 AM PDT

This story was published more than 18 years ago.

Hedge funds are typically favored by wealthy individuals and institutions looking for higher returns. These investment funds come with high risk. A local financial advisor explains how the county is

The County of San Diego’s pension fund just lost big time by investing in the Amaranth hedge fund. A poor decision by the fund to invest in natural gas caused the entire fund to lost most of its value. As a result, San Diego county lost an estimated 87 million dollars.

Hedge funds are risky. But the county’s pension fund has some high expectations for investment returns. And hedge funds can be very profitable. In fact, some county pensioners have been surprised to learn that their pension fund has put 20 percent of its assets into hedge funds. Compared to most pension funds, that’s an unusually high figure.

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Is the county courting financial disaster by its use of hedge funds?

Guest

John McDermott, registered principal and investment adviser and representative for GBI Financial.