Pensions Watch Warily As Hedge Fund Probe Grows

Nov 24 2010 | 6:08am ET

There's nothing like a federal insider-trading investigation to get institutional investors running the other way. A trio of public pension funds aren't quite doing that just yet—but they are taking a closer look at their investments in the firms raided by the Federal Bureau of Investigation on Monday.

Two of those pensions, the Ohio School Employees Retirement System and Massachusetts Pension Reserves Investment Management, have money with both Diamondback Capital Management and Level Global Investors. And both are watching the growing insider-trading probe carefully.

Tim Barbour, a spokesman for the Ohio Teachers, told Pensions & Investments that both Diamondback and Level Global had contacted it to reassure about the raids and to say they were cooperating fully. But no formal action was taken "because we really don't have enough information."

Ohio Teachers has $72.4 million invested in Diamondback and $35.1 million in Level Global.

MassPRIM's exposure is slightly more modest, with $48.4 million in Level Global and $17.2 million in Diamondback. But Executive Director Michael Trotsky assured the fund's trustees that he was monitoring the situation.

Two fund officials have been in touch with the two hedge funds "to learn about the investigation and to determine what options are available to us."

"While very few details of the investigation are currently available, our team is working diligently to ensure that we are doing everything we can to avoid a permanent loss of capital," he said.

The New Jersey Division of Investment has $83 million invested directly with Level Global. A spokesman told P&I that it "will monitor the events connected with these hedge funds in order to do everything we can to protect our investments."

The Garden State pension also has exposure to Diamondback and to SAC Capital Advisors, which has been subpoenaed in the federal investigation, through fund of hedge funds Arden Asset Management.


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