Three Louisiana pension funds that committed a total of $100 million to hedge fund Fletcher Income Arbitrage Leveraged Fund did not meet the investment process and educational requirements mandated by state law and best practice recommendations, according to a performance audit from Louisiana legislative auditor Daryl G. Purpera.
The audit was requested by the Louisiana House and Senate Retirement committees in response to the pension funds' March 2008 investments in the fund, managed by Fletcher Asset Management.
The $1 billion Louisiana Firefighters' Retirement System, Baton Rouge, committed $45 million; the $860 million Louisiana Municipal Employees' Retirement System, Baton Rouge, $40 million; and the $160 million New Orleans Firefighters' Pension and Relief Fund, $15 million.
The three retirement systems sought redemptions from the fund in April 2011, and as of this April did not receive any payments. Also this past April, a judge in the Cayman Islands ordered the liquidation of the Fletcher fund.
Among the issues in the report, the auditor pointed out a lack of documentation that MERS or the New Orleans pension fund “completed an asset allocation study and a comprehensive implementation plan for each asset class and investment decision.” The audit also states there was a lack of documentation by MERS and FRS “to support that the system(s) considered the ability to liquidate each investment.”
Phone calls to Steven Stockstill, executive director, and Kelli Chandler, controller/administrator, at Louisiana Firefighters; and Richard Hampton Jr., CEO and secretary-treasurer of New Orleans Firefighters, were not returned by press time.
Robert L. Rust, administrative director at MERS, referred questions to the system's response in the audit report. In the response, MERS states that the audit “misstates the facts pertaining to our asset allocation process.”