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THE DAILY ASTORIAN • WEDNESDAY, DECEMBER 30, 2015
2UHJRQLQYHVWPHQWRI¿FLDOV
stick with hedge funds
Lotteries
OREGON
Tuesday’s Pick 4:
1 p.m.: 8-3-0-6
4 p.m.: 9-4-3-1
7 p.m.: 1-9-5-4
10 p.m.: 3-4-9-3
WASHINGTON
‘What is your
New Year’s resolution?’
Tuesday’s
Daily
Game: 0-2-1
Tuesday’s Keno: 01-
07-10-12-17-18-22-25-26-
31-33-36-38-51-54-56-64-
66-68-77
Tuesday’s Match 4:
01-06-10-20
Tuesday’s Mega Mil-
lions:
20-25-55-62-74,
Mega Ball: 7
Estimated jackpot: $117
million.
“To get my A1C — three months’
check of blood sugar — in shape.”
Jim Dickson, Astoria
Memorial
Saturday, Jan. 2
LAYTON, Mildred La-
Vonne (Jones) — Memo-
rial at 2 p.m., First Baptist
Church of Astoria, 349
Seventh St.
“I don’t have one yet. I like to pro-
crastinate. I haven’t even thought
about it — maybe because I think
it’s silly, now that I’m older.”
Brian Gustafson, Astoria
On the record
DUII arrest
• At 2:06 a.m. Sun-
day, Clatsop County
Sheriff’s Office arrest-
ed Stephen Bokor, 27,
of Astoria, for driving
under the influence
of intoxicants on U.S.
Highway 30 and Liberty
Lane in Astoria.
“To be the best grandma I can be.”
Nora Crawford, Astoria
®
ACCUWEATHER FORECAST FOR ASTORIA
Astoria 5-Day Forecast
Tonight
Clear and cold
29°
Thursday
Oregon Weather
Shown is
tomorrow’s
weather.
Temperatures
are tonight’s
lows and
tomorrow’s
highs
The Dalles
25/33
Astoria
29/44
Portland
28/38
Corvallis
25/39
Eugene
24/39
Pendleton
16/23
Salem
24/40
Albany
23/39
Ontario
10/20
Bend
13/24
Friday
Burns
-1/14
Medford
23/42
Mostly sunny
Klamath Falls
8/23
Plenty of sunshine
Forecasts and graphics provided by AccuWeather, Inc. ©2015
44°
30°
Saturday
33°
Sunday
Plenty of sunshine
45°
45°
32°
Plenty of sunshine
45°
33°
Almanac
Sun and Moon
Astoria through Tuesday.
Temperatures
High ........................................... 45°
Low ............................................ 37°
Normal high ............................... 48°
Normal low ................................. 37°
Precipitation
Yesterday ................................ 0.19"
Month to date ........................ 20.34"
Normal month to date ............. 9.28"
Year to date ........................... 73.58"
Normal year to date .............. 66.65"
Sunset tonight .................. 4:38 p.m.
Sunrise Thursday ............. 7:58 a.m.
Moonrise today ............... 10:36 p.m.
Moonset today ............... 10:57 a.m.
Regional Cities
City
Baker City
Bend
Brookings
Eugene
Ilwaco
Klamath Falls
Medford
Newport
North Bend
Today
Hi Lo W
22 2
c
28 13 c
49 34 pc
42 24 c
44 36 pc
32 8
c
45 23 c
44 31 pc
50 34 pc
New
First
Full
Jan 1
Jan 9
Jan 16
Jan 23
Under the Sky
Hi
17
24
48
39
44
23
42
42
51
Thu.
Lo
0
9
32
21
38
4
21
32
34
Hi
60
46
28
23
21
34
48
34
82
32
30
49
65
50
83
49
59
51
40
50
37
25
51
38
54
Thu.
Lo W
45 pc
32 pc
14 c
6
s
10 pc
25 sf
34 c
16 pc
68 s
22 c
13 pc
30 s
41 s
35 pc
73 pc
31 pc
50 sh
37 pc
23 pc
36 pc
24 pc
7 pc
36 s
27 s
37 pc
W
s
s
s
s
s
s
s
s
s
National Cities
Today
City
Hi Lo W
Atlanta
67 52 r
Boston
36 36 c
Chicago
31 23 sn
Denver
24 7 pc
Des Moines
27 9
sf
Detroit
35 28 c
El Paso
45 27 s
Fairbanks
35 18 pc
Honolulu
81 70 pc
Indianapolis
37 26 c
Kansas City
29 15 pc
Las Vegas
48 30 s
Los Angeles
63 40 s
Memphis
52 37 pc
Miami
83 75 pc
Nashville
56 35 c
New Orleans
63 54 t
New York
49 45 r
Oklahoma City 38 25 pc
Philadelphia
54 44 r
St. Louis
39 25 c
Salt Lake City
30 12 sn
San Francisco
51 38 pc
Seattle
39 27 pc
Washington, DC 56 45 r
Last
City
Olympia
Pendleton
Portland
Roseburg
Salem
Seaside
Spokane
Vancouver
Yakima
Today
Hi Lo W
38 21 pc
28 16 c
41 28 pc
47 29 c
41 24 c
44 34 pc
22 11 c
39 25 pc
29 16 c
Hi
37
23
38
42
40
44
21
37
27
Thu.
Lo
20
12
26
27
23
34
5
23
10
W
s
c
s
s
s
s
c
s
c
Tonight's Sky: The Winter Circle - Sirius is
the brightest star in the night sky followed by
Capella, Rigel, Procyon, Betelgeuse, Aldebaran
and Pollux.
Source: Jim Todd, OMSI
Tomorrow’s Tides
Astoria / Port Docks
Time
High
5:29 a.m. 8.3 ft.
5:09 p.m. 7.2 ft.
Time
11:29 a.m.
11:28 p.m.
Low
2.9 ft.
1.6 ft.
Tomorrow’s National Weather
Fronts
Cold
Warm
Stationary
Showers
T-Storms
-10s
-0s
0s
10s
20s
30s
40s
50s
60s
70s
80s
90s
100s
110s
Rain
Flurries
Snow
Ice
Shown are noon positions of weather systems and precipitation. Temperature bands
are highs for the day. Forecast high/low temperatures are given for selected cities.
Weather (W): s-sunny, pc-partly cloudy, c-cloudy, sh-showers, t-thunderstorms,
r-rain, sf-snow fl urries, sn-snow, i-ice.
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OBITUARY
POLICY
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For more information, call
503-325-3211, ext. 257.
Alternatives
insulate pension
fund from
market crashes
cited market data that showed
hedge fund performance was
“highly correlated” with the
stock market.
As it turns out, other state
pension funds have not fol-
lowed Calpers’ decision to
divest. The California pension
By HILLARY BORRUD
system cited costs and com-
Capital Bureau
plexity as reasons for its 2014
decision to exit from hedge
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for ways to blunt the impact
Impossible to know
of future stock market crashes
The Oregon State Treasur-
on the state’s $70 billion pen-
sion fund have increasingly HU¶V2I¿FHGHFOLQHGWRUHOHDVH
looked at hedge funds as part the fee schedules for the three
hedge funds in which the
of the solution.
The state started to buy pension system invested, cit-
into the funds in 2011, and ing an exemption in Oregon
now has more than $300 mil- public records law. It allows
lion invested in them. That’s the agency to keep hidden
a small portion — roughly any documents submitted by
0.5 percent — of the pension hedge funds and other private
fund’s assets. But under its in- funds not subject to federal
vestment policy, the amount disclosures and other regula-
could grow. The policy calls tions.
As a result, it’s impossible
for up to 45 percent of the al-
ternatives portfolio, or rough- to know how much the pen-
ly 6 percent of the entire pen- sion fund will pay over the
sion fund , to be invested in a life of the investments. The
category that includes hedge 7UHDVXUHU¶V2I¿FHGLGUHOHDVH
aggregate hedge fund fees for
funds.
3HQVLRQRI¿FLDOVDUHVWLFN 2014, which suggest the state
ing with the strategy, in spite paid 0.27 percent in fees that
of recent critiques of pension year on two hedge funds —
systems’ investments in the AQR Delta Fund II and AQR
funds and the 2014 decision Style Premia Fund — and
by the nation’s largest pension 1.07 percent on the third fund,
fund, Calpers, to divest from Reservoir Strategic Partners
Fund.
hedge funds.
That is probably a tiny
State Treasurer Ted Wheel-
er and other members of the portion of what the state will
Oregon Investment Council eventually pay, given the typ-
hope hedge funds and other ical hedge fund fee structure.
Keith Larson, a member of
alternative investments will
help the state avoid a repeat the Oregon Investment Coun-
of what happened in the 2008 cil, said hedge funds typically
¿QDQFLDOFUDVKZKHQWKHSXE charge a 2 percent manage-
lic employees’ pension fund ment fee, plus a 20 percent
lost a third of its value in six FXWRISUR¿WVZKLFKLVSDUWO\
why the funds have a negative
months.
The fund has largely re- image.
One of the AQR funds had
covered from the effects of
the crash, but for a variety of a return of 5.6 percent as of
other reasons the state now June, while it was too early to
faces an $18 billion unfunded calculate a return on the sec-
pension liability over the next ond fund, according to a state
two decades. The shortfall document. Reservoir Strategic
could grow if the state’s in- Partners Fund had a return of
vestment returns continue to 3.9 percent which, although it
fall short of the 7.5 percent as- was below the state’s assumed
sumed rate of return or if there overall pension fund return of
7.5 percent, was not bad com-
is an economic downturn.
Promise of
uncorrelated returns
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are most interested in hedge
funds’ promise of uncorrelat-
ed returns, meaning that the
funds will lose less — or per-
haps even produce returns —
in a down economy. Although
research has shown hedge
fund performance is correlat-
ed to the stock market, Ore-
gon has invested in funds with
“truly uncorrelated returns,”
according to Oregon State
Treasury
Communications
Director James Sinks.
“Currently, about 70 cents
of every $1 in (pension) ben-
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gains, so sustainable and
strong performance is key,”
Sinks wrote in an email.
In late November, re-
searchers at the Roosevelt
Institute released a report that
examined hedge fund invest-
ments by 11 other states. The
researchers, who also received
support from the American
Federation of Teachers and
the Haas Institute for a Fair
and Inclusive Society at the
University of California,
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correlation” between hedge
fund returns and overall pen-
sion fund investment perfor-
mance. The researchers also
‘We’ve
never seen
that kind
of a global
crash of the
fi nancial
markets
like we saw
in the last
downturn.
Usually it
was just
equities
or bonds,
it wasn’t
everything.
But
everything
went down.’
Katherine
Durant
Chairwoman of the Oregon
Investment Council
pared with the state’s actual
pension fund return of just un-
GHU SHUFHQW GXULQJ WKH ¿UVW
11 months of the year.
Strong support
Hedge funds enjoy strong
support from the Oregon In-
vestment Council, which has
unanimously supported them
every time there was a vote
to invest in a new fund. The
council’s experience during
WKH ¿QDQFLDO FROODSVH
helps explain why.
The crash revealed that
HYHQ ¿[HGLQFRPH LQYHVW
ments, such as bonds and oth-
er securities, were riskier than
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“Part of the reason for that
was in order to try and achieve
a high return for the state, the
state had invested in a lot of
corporate debt,” Larson said.
The pension fund had also
invested in mortgage-backed
securities, many of which
contained high-risk loans that
went into default during the
housing crisis.
Katherine Durant, the
chairwoman of the Oregon
Investment Council, said the
2008 crash was a pivotal mo-
ment. “We’ve never seen that
kind of a global crash of the
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in the last downturn,” Durant
said. “Usually it was just eq-
uities or bonds, it wasn’t ev-
erything. But everything went
down.”
Larson agreed. “That was
a bit of an aha moment,” Lar-
son said. “I think the people
that were doing the day-to-
day investing knew well and
good pretty much what we
were investing in. We were in-
vesting in these turbo-charged
assets, that had higher returns
but higher risk ... But I think
LW ZDV D GLI¿FXOW WKLQJ WR VHH
across the entire portfolio,
what the effects would be.”
Wheeler, who became
treasurer in March 2010, said
it was important to diversify
the state’s pension fund in-
vestments so that various in-
vestments move in different
directions, under different
conditions. “In some cases,
they can serve as counter-
ing forces to economic forc-
HV OLNH LQÀDWLRQ´ :KHHOHU
said. “In 2008, there was no
safe harbor. Everything went
down.”
Better understand risks
Larson said the situation
taught him two things: The
Oregon Investment Council
needed to better understand the
risks across investments, and it
needed to build a better portfo-
lio of alternative investments
to prepare for economic down-
turns. The state purchased a
system to better track assets
and risk, and has been working
to build the alternatives portfo-
lio, which in addition to hedge
funds includes investments in
funds that own natural resourc-
es such as timber and infra-
structure such as ports, airports
and a power plant.
Uncorrelated returns are
important to the pension fund
because when its value dips,
schools and other public em-
ployers can end up paying
more into the fund.
“It’s as much about the un-
correlated returns as it is about
the high returns,” Larson said
of the alternatives portfolio.
The Capital Bureau is a
collaboration between EO
Media Group and Pamplin
Media Group.
Holy Day of Obligation on Friday
The Daily Astorian
The Holy Day of Obligation is Friday at St.
Mary Star of the Sea Catholic Church, 1465
Grand Ave. A Vigil Mass is being held at 4 p.m.
Thursday, and a 10 a.m. Mass takes place on
Friday.
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