Orange County Employees Retirement System, Santa Ana, Calif., has about $4.5 million of Credit Suisse Group stock, $250,000 of Credit Suisse additional tier 1 bonds and a combined $6 million in banks that have failed or threaten to fail, said Molly A. Murphy, chief investment officer of the $20.5 pension fund at Monday's board meeting.
OCERS has $3 million in First Republic Bank stock, and a total of $3 million in Silicon Valley Bank and Signature Bank stock. Most of OCERS' stock holdings of those banks are in index funds, Ms. Murphy said.
OCERS had $8.9 billion in global equities, including $5.3 billion in U.S. equities, as of Dec. 31.
As part of UBS Group's deal to buy troubled Credit Suisse Group, Credit Suisse's AT1 bonds that were written to zero, Ms. Murphy said. A new structure created after the 2008 financial crisis, AT1 bonds are a type of debt issued by a bank when its capital levels fall below levels mandated by law, Ms. Murphy said. Credit Suisse, which had already gone through multiple unsuccessful restructurings before the recent crisis, had issued a lot of AT1 bonds, she added.
Most Western countries provide for AT1 bonds, Ms. Murphy said.
"Everyone is looking to see if with a swipe of a pen" AT1 bondholders can be wiped out, she said. "There may be litigation."
In addition to the specific small exposure to troubled banks, financial stocks in general is down about 15%, impacting OCERS equity portfolio, Ms. Murphy said. Year-to-date OCERS entire portfolio is up around 1%, she said.
It's been "one heck of a two-week roller-coaster ride," Ms. Murphy said.
