“The Kresge Foundation knew they had taken the position before it was published in the [Wall Street] Journal, and we’re in Troy, Michigan,” according to Kresge CIO Robert Manilla, on May 15, referring to the J.P. Morgan announcement a few days earlier of a $2 billion loss in its London-based hedging unit known as the chief investment office.

Losses from the Whale Trade, as it is now known, are estimated at close to $9 billion.

So with all that extra time to watch the trade unfold, what do institutional investors think of that loss and its consequences, both regulatory and reputational?

Manilla was, on that morning, sitting with seven other top pension, endowment and foundation investors in New York City for a roundtable discussion after Institutional Investor’s Money Masters awards dinner. Joining Manilla were Donald Lindsey, CIO at George Washington University; Lawrence Schloss, CIO of the New York City Employee Retirement System; Douglas Brown, CIO of Exelon Corp.; Conrad Freund, COO of the LA84 Foundation; Sean Gissal, CIO at Marquette University; Joshua Gotbaum, director of the Pension Benefit Guaranty Corp.; and Lee Partridge, CIO at Salient Partners and CIO of the San Diego County Employees Retirement Association.

Editor Michael Peltz and Senior Writer Frances Denmark facilitated the two-hour discussion, excerpts of which appear below. The full roundtable will appear in the July-August issue of Institutional Investor and, along with some other timely excerpts, on the website.

Larry Schloss: It is terrible timing.

Robert Manilla: Yes, that’s a huge issue. If you’re going to hedge, you have to spend money to do it, and quite often you’re going to waste that money. We occasionally take views on the market, when we think things are overbought or oversold, and we’ll hedge it. We set a hedging budget each year. We’re willing to spend up to almost a percent of the fund on hedging if we think there are markets that need to be hedged, so that’s spending premium, usually. Hedging is expensive. Ideally, we’d rather just take the cash back and de-risk the asset allocation, but that’s not always an option.

Joshua Gotbaum: There’s another thing that’s going on, which is learning. As financial markets, financial instruments and the global markets change, all institutions are simultaneously in the process of taking risks and learning about the risks they’re taking, and then putting in place governance and oversight structures to manage those risks once they understand them. That’s a never-ending process. The fact that there was a mistake at J.P. Morgan, and it wasn’t caught, doesn’t mean that people shouldn’t try to recognize the risks. It is that they should pay attention and correct afterwards.