The SBA Dice Roll

Right now Florida feels more like the “Cross hairs” than the “Sunshine” state.  

Housing-market implosion, insurance roulette, unemployment notoriety, oil slick scenarios and hurricane season. Our destiny is hardly limited to our own doing.

But now we find out that the State Board of Administration, the agency that manages Florida’s (nearly $114-billion) public pension fund, wants to reduce its holdings in publicly traded stocks and bonds and increase its allocation to the likes of hedge funds. As in pooled managed portfolios that aren’t regulated by the SEC. If the past, indeed, continues its prologue ways, we can expect hedge-fund managers to make more speculative investments as the tradeoff for the possibility of improved short-term gains–and an incidence of risk typically higher than the overall market.

It’s as if the last three years never happened. Boosting returns in public pensions should be a prudent exercise in long-term thinking not a roll-of-the-dice venture.  Hedge funds don’t outperform the S&P 500 in the long term.

And, ironically, this might not even become an issue in the 2010 race for governor. Among those agreeing with the hedge-fund strategy of SBA Executive Director Ash Williams: Democratic gubernatorial candidate Alex Sink, Florida’s Chief Financial Officer, and her Republican counterpart, Attorney General Bill McCollum.

Roll ’em.

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