The top manager for the state retirement system answered questions from legislators today on the possible loss of hundreds of millions of dollars invested with a firm now under federal investigation.
The Iowa Public Employees Retirement System ( IPERS) invested over $300-million with W.G. Trading and Westridge Capital Management.
The owners of the company were arrested and the company assets frozen in a federal fraud investigation. Some experts predict IPERS will not recover the money invested in the company, — but IPERS chief investment officer Karl Koch says they don’t know at this point.
"We have heard that there are a substantial amount of assets left for distribution. I don’t know if that’s fact or fiction," Koch says. The money was invested in a form of trading known as enhanced indexing, which Koch tells lawmakers was meant to minimize, not maximize risk.
"The objective that were following was meant to add value to whatever the stock market return was," Koch said, "the stock index arbitrage strategy appeared to fit that bill." Koch defended the investment, saying if auditors could not uncover fraud how could IPERS.
Koch says they have gone to court to try and recover the money and he says if the company does have assets remaining, it could take years to get it back. Koch told legislators IPERS will learn from their mistakes if they made any.