SC Fund To Put $100M in Subprime Mortgage Investments

December 5, 2007 (PLANSPONSOR.COM) - As the nation's subprime mortgage crisis continues to wreak havoc in the financial markets, South Carolina's $30 billion pension plan is moving to benefit from a fire sale of distressed investments in the subprime mortgages.

A Charlotte Observer news report said the South Carolina system has invested about $20 million out of a total $100 million commitment to the TCW Special Mortgage Credits Fund. TCW Group, a unit of French bank Societe General SA, launched the fund in August to invest in mortgage-related securities and other distressed loans, according to the Observer.

Bob Borden, chief investment officer of the South Carolina Investment Commission, which manages the state’s pension money, told the Observer that while the pension fund had mortgage investments in the past, it didn’t have subprime-related investments.

The TCW fund’s goal is to buy up the securities at bargain prices and make money when the market stabilizes, he said. “We are trying to capitalize on an opportunity that became available,” Borden told the newspaper.

Borden said the remaining $80 million investment is being spread over three or four years. “We’re not doing this all at once,” he said.

He told the newspaper that the pension fund has a target return rate of 7.25% and must take enough risk to generate the necessary returns.   

According to the Observer, since voter approval last November, the South Carolina fund has diversified. Once split roughly evenly between bonds and stocks, it now has about a 30% position in alternative investments.

The pension fund provides retirement benefits to 487,000 public workers and retirees.