Louisiana Pensions May Have Little To Collect From Fletcher

Apr 26 2012 | 2:41pm ET

Three Louisiana public pension funds may have won their legal battle with Fletcher Asset Management, but they could still be nursing about $100 million in losses.

A Cayman Islands court last week approved the pensions' winding-up petition, ruling that New York-based Fletcher's FIA Leveraged Fund is "very doubtfully solvent." The ruling itself, obtained by the New Orleans Times-Picayune, goes into more detail on that point, and is sobering reading for the Louisiana Firefighters' Retirement System, Louisiana Municipal Employees' Retirement System and New Orleans Firefighters' Pension and Relief Fund.

The pensions invested $100 million with Fletcher four years ago, and claim that the hedge fund guaranteed a 12% annual return. When they sought to redeem a portion of their investment in March 2011, the pensions received promissory notes, and then moved to redeem their entire investment, which Fletcher said had grown to $136 million. The two sides have been negotiating ever since.

According to the ruling, Fletcher in February proposed to transfer assets from another Fletcher vehicle to a new entity registered to the three pensions. But while Fletcher says the assets are worth $136 million, the Caymans judge called them "virtually worthless."

Fletcher said it would have a "surplus" of $37 million after the transfer, so if the assets it proposed to transfer have no value, it is unclear how much the pensions will be able to recover.

Fletcher has said it is considering an appeal of the Caymans ruling.

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