SUBJECT AREAS: Derivatives, risk management, pension funds, swaps.CASE SETTING: 1994-1995, state-operated investment fund, U.S.REQUESTS FOR COPIES: You may order a copy of this case by contacting: South-Western College Publishing, CaseNet, at www.thomson.com/casenet (downloadable at www.thomson.com/casenet/abstracts/swib.html), or by email at [email protected] early 1995, the State of Wisconsin Investment Board, which manages the retirement fund and other funds for Wisconsin state and local governments, lost $95 million from twelve derivatives transactions in its $6.7 billion portfolio of short-term, interest-bearing securities. The complex and speculative nature of the transactions raised a number of issues. Were the transactions appropriate for the fund? Was the fund manager aware of leverage imbedded in the payoff formula? Were the transactions consistent with the fund's stated objectives? Was the fund manager misled by the derivatives dealer? Were the fund's personnel sufficiently informed about the uses and risks of derivatives? Did the fund have an adequate risk management system?