New Jersey Pension Fund Lost $50 Million on Lehman

[Joanne98]

By Hui-yong Yu and Adam L. Cataldo

Sept. 11 (Bloomberg) -- New Jersey's state pension fund lost $50 million on the sale of about 3 million shares of Lehman Brothers Holdings Inc. during the past two months, fund director William Clark said.

New Jersey had bought 4.2 million Lehman common shares for about $118 million in June when the U.S. securities firm raised $6 billion in a stock sale. The state paid $28 a share for the stock that it later sold at an average price of $19.35, Clark said in a telephone interview. New Jersey still holds $60 million of Lehman preferred shares that have a dividend of 8.75 percent.

``Look, I am really not happy about making a mistake in this Lehman investment,'' Clark said. ``You think something comes down in price and that it looks really cheap. It was a mistake a lot of people have made and we have made as well.''

Lehman shares plunged to a 13-year low today as doubts grew about its ability to survive record losses from the global credit market meltdown that already claimed Bear Stearns Cos. and led to more than $510 billion of writedowns and credit losses since beginning last year. New Jersey lost an average of 31 percent on its share sales, state Treasury Department spokesman Tom Vincz said.

Record Loss

New York-based Lehman yesterday reported a record $3.9 billion loss and outlined plans to spin off as much as $30 billion of commercial real estate assets to shareholders, sell a majority stake in its asset-management unit and slash its dividend after investment talks with Korea Development Bank broke down.

New Jersey bought the Lehman stock to boost returns for the $77.2 billion pension fund. The investment was at the time the state's third in a Wall Street investment bank in six months. In January, New Jersey bought $400 million preferred convertible shares in Citigroup Inc., and $300 million of shares in Merrill Lynch & Co.

New Jersey officials billed the investments at the time as an opportunity to use their size and name to get beneficial terms for the fund. Clark said the

``When you have a portfolio this big, you are going to have losses on certain securities,'' Clark said. ``I can guarantee you I can go through the portfolio and find securities we lost more on than on Lehman. If you can't accept that fact, you shouldn't be running a pension fund.''

The pension fund lost $4.4 billion, or about 3.1 percent of its assets, for the year ended June 30. More than 700,000 current and retired state employees are members and depend on the fund for payments upon retirement.

To contact the reporters on this story: Hui-yong Yu in Seattle at [e-mail]; Adam Cataldo in New York at [e-mail]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aM7UkYmMrJUs&refer=home

[no_hypocrisy]

1. That sucks. It was underfunded as it existed BEFORE that relevation.

[LiberalEsto]

2. Christie Toad Whitman looted it

when she was governor