Citing settlement documents filed in the funds’ court cases, the Associated Press said Advanced Investment Management L.P. apparently could only muster about $14.7 million from cash on hand and insurance to pay back the losses. That means that the settlements are apparently only for about 3 ½ cents on the dollar. Advanced closed in mid-2002 (See Advanced Investment Shutting Down ).
Advanced employed an enhanced-indexing strategy in which index futures contracts and leverage were used in an attempt to outperform a benchmark, such as the S&P 500 Index. The firm’s troubles began about a year ago when several of its clients terminated their contracts and pulled their money after accusing the firm of violating written investment guidelines (See Advanced Management President/CIO Resigns in Wake of Controversy ). Advanced denied any wrongdoing at that time.
San Bernardino County Employees’ Retirement Association was one of the first to initiate legal action against Advanced Investment Management last summer (see Calif. Pension Plan Sacks Consultant ). Its account allegedly suffered a loss of $63.4 million after the pension fund had initially invested $460 million with Advanced. The account of Contra Costa County Employee’s Retirement Association also appeared to take big hit, with a loss of nearly $60 million on its initial investment of $287.3 million. It looks to get back about $2.1 million (see Advanced Management President/CIO Resigns in Wake of Controversy ).
Some of the companies whose pension assets were affected include such well-known names as Dow Chemical Co, General Mills Inc. and Hershey Foods Corp.
According to the documents, Dow Chemical initially invested about $248.6 million with the firm, and losses in its Advanced account ended up totaling about $49.7 million. Documents show Dow is due a payment of about $1.76 million from the settlement. General Mills lost about $30 million on its original investment of $105.2 million, while Hershey lost $10.4 million after starting with roughly $90 million in its Advanced account.
The settlement agreement indicates that Advanced still doesn’t admit any “liability or responsibility at any time for any purpose whatsoever,” and the agreement “shall not be deemed to constitute an admission or concession,” on the part of Advanced.