Thursday, August 23, 2007

Calpers chief welcomes credit turmoil

The investment chief of the nation’s largest public pension fund has claimed the credit crunch that began with defaults on US sub-prime mortgage loans will aid the overall health of the financial system.

Russell Read, chief investment officer of the $245 billion California Public Employees’ Retirement System (Calpers), told Bloomberg: “The re-calibration of risk is inherently healthy and actually bodes well for investors in most markets …The moderate de-leveraging of the financial system is also healthy.”

Read said the correction would probably result in a good re-pricing of risk long term for most markets.

Read told Bloomberg that most investors believe the Federal Reserve will prevent a US recession in the US by limiting damage beyond the sub-prime mortgage market. It has already injected billions of dollars, but rumors are swirling that it may take more extreme action in the form of an emergency interest rate cut to restore equilibrium.