"The thinking was that there is too much riding in public equity right now," Butkovitz said. "We wanted to give the internal staff some more flexibility to ride out this market. As I understand it, our current [equity] managers can't even cash out; they've got to stay in the market no matter what's happening."
Said Dubow: "I think it's prudent. It's not a big percent of the fund, so it gives us a chance to look at this and see whether it works, and it does gives us a chance to kind of counteract what's going on in the market."
Butkovitz said he expected Handa to keep the money in cash, perhaps buying stocks or short-selling, "until stability returns to the market."
Handa, who has worked for five investment firms over the last 15 years, said that if he'd had funds to invest in July, as the nation's debt crisis festered and there were signs of a weakening U.S. economy, the pension board might have protected its money by buying put options, investments that would have climbed in a market downturn.
Early this week, Dubow estimated the pension fund's recent market losses at $120 million, but that was several volatile days ago. He said he did not have updated figures.
The $40 million will come from the liquidated domestic stock portfolios of two investment managers the pension fund had already decided to phase out - Turner Investment Partners and Penn Capital Management. The pension-fund assets managed by the two firms totaled $50.7 million at the end of June but stood at $40.3 million as markets opened Thursday, according to the city fund's executive director, Francis X. Bielli.
Bielli said he expected the money to be available for reinvestment next week.
Two board members, Carol Stukes and Veronica Pankey, representing city workers in AFSCME District Councils 47 and 33, respectively, voted against creation of the new fund.
