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Meriden Retirement Board
Tuesday – May 8, 2007
Overview
As Wall Street marched through record high ground last Wednesday, the Federal Reserve issued a report on Hedge funds, which now control more than half the trading volume of stocks and bonds.~ Fed economist Tobias Adrian warned that a “common shock” could cause serious problems if all the hedge funds were trapped on the wrong side of similar trading strategies. However, the Fed report claims higher risk today is not a serious systemic concern, because there is greater diversification among hedge funds than found in past years. Later that same day, Forbes posted the news item: “UBS Hedge Fund Bites the Dust.” Sub-Prime mortgages were blamed by the Swiss banking giant for a $123 million loss. The fund promised to return what’s left of their investors’ money.~
The Dow Jones Industrials advanced more than 9% in six weeks, yet remained undervalued in a performance comparison of 52 global markets, ranking 42nd over the past three years. While the market averages touched successive highs, analysts noted a lack of retail participation – meaning that individual investors have not driven the market as they did in the Tech bubble.~ Institutional and corporate liquidity propelled the Dow and the S&P to multi-year highs.~
Meriden Retirement Funds
The Meriden pension funds closed April with a composite balance of $242 million, representing a gain of more than 12% for the 2007 fiscal year, ending June 30.~ The City Employees Retirement finds totaled $137.5 million and the Police/Fire funds, $104.5 million.~ The composite fund asset allocation has 52% in domestic equities, 15% in foreign stocks, 10% in gold, 5% in bonds, 3% in REITS, 8% in managed futures, and 7% in cash equivalents.
Manager/Investment Updates
The Investment Sub-Committee continues to review portfolio managers on May 22nd at 4:00 pm, with Templeton Investment Advisors presenting its first update since assuming responsibility for the international investment accounts. CNL’s Hotel REIT has been acquired by Morgan Stanley, providing a $5.5 million payment. CNL reports the total return (dividends plus cash redemption) from the Board’s original $5.3 million purchase (October, 2002) was $7.8 million. As directed in February, a significant portion of the cash proceeds is being reinvested in additional real estate offerings. Additional funds are earmarked for high yield fixed income, as directed by policy.
Patrick J. Sheehan
Gerald Hazen Glass
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