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Investment adviser praises conservative portfolio, warns of private‑investment valuation risks
Summary
Curtis Chambers & Associates told the board its conservative, liquid portfolio delivered a strong quarter but flagged broader industry concerns: private investments often use operator valuations that can mask losses and create misleading peer rankings; the firm has modestly trimmed large‑cap positions to take profits.
Mr. Franco of Curtis Chambers and Associates delivered the board’s quarterly investment report, calling it "good news" overall but warning trustees about valuation and liquidity risks in large private‑investment holdings held by many public pension peers.
Franco told trustees that private investments—private equity and similar vehicles—often report valuations based on operator or general partner marks rather than realized market transactions, which can cause large institutional portfolios to appear healthier on paper than they are in cash terms. "There's an incredible lack of transparency," he said, adding that recent large transactions in other public pensions forced markdowns when positions were sold.
Franco reviewed comparative rankings: against a conservative peer universe the Edgewater plan has generally performed strongly (7.3% over five years in the firm’s presentation), while comparisons to a broader public‑pension universe can swing quarter to quarter depending on peers’ use of illiquid private investments. He said the plan’s conservative allocation—largely U.S. large‑cap equities, traditional bonds and some real estate—provides liquidity that can prove advantageous in volatile periods.
On portfolio actions, Franco said the firm has taken modest profits by trimming overweight large‑cap positions (reporting about an 11% overweight before trimming) rather than making aggressive shifts. He noted market drivers to watch include Federal Reserve decisions on interest rates, tariff effects and inflation dynamics, which could produce pronounced volatility.
The board asked no substantive follow‑up questions in the recorded transcript; Franco closed by reiterating the firm’s intent to rebalance modestly and monitor macro drivers.
