Trustees of the defined benefit plan of the Town of Fairfield, Conn., voted to terminate the contract of investment consultant NEPC after reviewing what appears to be a $41 million loss from its investment in the MAXAM Absolute Return Fund LP, a Madoff feeder fund offered by MAXAM Capital Management.
Fairfield plan trustee Kenneth A. Flatto told Pensions & Investments that the pension fund’s investment committee asked NEPC in 2006 to review the plan’s portfolio and its investment managers “to identify any weaknesses” and to make recommendations for changes. NEPC reportedly recommended some minor changes to add more manager diversification by slightly reducing the MAXAM allocation from the normal 10% limit but “gave us no warning or red flags about MAXAM” or its investment in Mr. Madoff’s investment strategy, Mr. Flatto said.
Mr. Flatto added that “our biggest question is whether anyone looked at the Madoff strategy, understood what it was supposed to be and whether the trades made sense. We really rely heavily on our (consultant) to give us the best possible advice and we listen to them.”
The Pensions & Investments article further notes that at a Jan. 8 meeting, Fairfield pension trustees also passed a motion “to seek recourse from any parties related to the losses from Madoff investments.”