Massachusetts Pension Reserves Investment Management board, Boston, had $12 million of exposure to Bernard L. Madoff Investment Securities, the firm run by the Wall Street veteran charged with perpetrating a multibillion-dollar Ponzi scheme.
The $39.6 billion Massachusetts system is trying to figure out its legal remedies, and it remains unclear how much it will be able to recover, Michael Travaglini, executive director, said in a telephone interview.
MassPRIM’s exposure to Madoff came through a $170 million allocation this summer to Austin Capital Management, a hedge fund of funds, as part of PRIM’s portable alpha program.
Mr. Travaglini said regional, county and municipal systems in the state that invest in MassPRIM’s absolute-return portfolio to get hedge fund exposure won’t be affected by the potential Madoff-related losses. Those systems that give MassPRIM all of their assets to manage will have exposure, but even in a worst-case recovery scenario the damage will be minimal, he said.
Asked if Austin’s choice of Madoff as part of its hedge fund lineup had soured MassPRIM on the firm, Mr. Travaglini said: “We will certainly follow up with Austin,” but other PRIM fund-of-funds managers over the past year that had exposure to hedge funds that blew up, such as Amaranth Advisors and Sowood Capital Management, haven’t been terminated, and there’s no reason to jump to a different conclusion because of a problem with one of Austin’s 25 to 30 managers.
