Trustees of the $233 million defined benefit plan of the Town of Fairfield, Conn., voted to terminate the contract of investment consultant NEPC after they assessed the likely loss of $41 million the plan invested in the MAXAM Absolute Return Fund LP, a Madoff feeder fund offered by MAXAM Capital Management.
Kenneth A. Flatto, Fairfield plan trustee and first selectman, an elected position, said the pension fund’s investment committee asked NEPC when it was first hired in 2006 to review the plan’s portfolio and its investment managers “to identify any weaknesses” and to make recommendations for changes.
NEPC recommended the plan add more manager diversification by slightly reducing the MAXAM allocation from the normal 10% limit for investment in any single manager, but “gave us no warning or red flags about MAXAM” or its investment in Mr. Madoff’s investment strategy, Mr. Flatto said.
“Our biggest question is whether anyone looked at the Madoff strategy, understood what it was supposed to be and whether the trades made sense,” Mr. Flatto said. “We really rely heavily on our (consultant) to give us the best possible advice and we listen to them.”
At their Jan. 8 meeting, Fairfield pension trustees also passed a motion “to seek recourse from any parties related to the losses from Madoff investments.”
Michael P. Manning, NEPC president, declined to comment.
