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State pension chief wants to double down on investment strategy

TALLAHASSEE — The official managing Florida's $120 billion pension fund wants lawmakers to double the amount of money his agency can set aside for special investments that critics say are harder to value and carry more risk than traditional stocks and securities.

Ash Williams, reaffirmed Wednesday as the State Board of Administration's executive director and chief investment officer for another year, said increasing the spending cap on "alternative investments" from 10 percent to 20 percent will diversify the state's portfolio and reduce risk in a dreary market.

"It is not about struggling to get higher returns and taking on more risk in the effort," Williams said.

But critics say just the opposite, painting the investments as secretive and potentially dangerous.

Alternative investments include hedge funds, private equity, venture funds or an investment in a portfolio company through an investment manager. They are not publicly traded.

Florida's pension fund, the fourth-largest in the nation, was valued at about $120 billion on Monday, down about $8 billion since June.

"It's a hell of a lot of money," said Edward Siedle, president of Benchmark Financial Services, which investigates money-management abuses on behalf of pensions. "It's a fifth of the portfolio."

If approved by the Legislature, the target percentage would be 16 percent, not the full 20 percent allowed, Williams told a Senate committee mulling the cap on Jan. 9. The national average allocation on alternatives is 19 percent, he said, so the request is not "outlandish."

Gov. Rick Scott expressed doubts about the investments before taking office but approved Williams' request last year, along with pension trustees CFO Jeff Atwater and Attorney General Pam Bondi.

The proposal must still be approved by the Legislature. Lawmakers agreed in 2008 to raise the cap from 5 percent to 10 percent.

Lawmakers already have started to debate the issue. Sen. Jeremy Ring, D-Margate, a former Yahoo! executive and a sponsor of the measure, argued in a recent committee meeting that the cap should be upped because returns on these types of investments were up 7.5 percent last year — 2 percent above target.

But a preliminary vote was tabled after Sen. Jack Latvala, R-Clearwater, raised concerns about a previous investment deal.

In 2011, Williams took heat for the agency's decision to invest $125 million of public pension money in a hedge fund called Starboard Value and Opportunity, a spinoff of Ramius LLC. The president of that firm knew Williams.

When Sen. Mike Fasano, R-New Port Richey, requested public records about the deal, he was told by Williams he would have to pay nearly $11,000. The records eventually were produced at no cost, but Fasano said this week that documents were missing or redacted, making the records "essentially useless."

Latvala said he wants to meet with Williams about the requested cap increase. At the committee hearing, he asked Williams if his head-butting with Fasano taught him anything.

"I will admit you have generally a very good reputation in these halls," Latvala said. "Have you learned anything by this experience in dealing with the Senate, the Legislature, that you want to share with us?"

"I would simply say humility is a good thing and that's not a lesson lost on me," Williams said. "And I have great respect for this institution. Period."

Katie Sanders can be reached at ksanders @tampabay.com.

State pension chief wants to double down on investment strategy 01/18/12 [Last modified: Wednesday, January 18, 2012 9:34pm]
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