NEWS BRIEFS: Defined contribution assets grow to $4.6 trillion

Public and corporate defined contribution plans grew 10% to $4.6 trillion at year-end 2006, according to the Society of Professional Asset Managers and Record Keepers.

In SPARK’s annual report, the Marketplace Update, corporate DC plans comprised 87% of all DC assets at roughly $4 trillion in assets. About $2.6 trillion, or 65% of those assets are in 401(k) plans. Corporate 401(k) plans grew 11% from 2005.

SPARK also found that total retirement plan assets, including DC plans and IRAs, were $14.3 trillion in 2006, a 10% increase from 2005.

Virginia to start auto enrollment

RICHMOND, Va. — Virginia Retirement System will begin automatically enrolling all workers hired after Jan. 1, 2008, in its defined contribution plan, according to the $790 million 457 plan’s website. Brian Goodman, legal affairs and compliance coordinator, did not return calls seeking additional information.

State employees will have $20 each pay period deferred from their paychecks, and the state will contribute $10. No decision, however, has been reached on which default investment options will be used, according to the website.

More execs eye pension risk, survey shows

NEW YORK — CFOs and finance executives are paying more attention to pension risk than they did three years ago, according to results of a new survey by Towers Perrin and CFO magazine. While 5% of respondents said they pay less attention, 52% said they pay more attention and 43% said they pay the same amount of attention to pension risk as they did three years ago. But despite increased recognition of pension risk, only 35% of respondents said management had created an “explicit pension risk management strategy.” That may be because only 6% of the finance executives surveyed considered pension risk to be a “substantial risk,” and none ranked it an “acute risk.”

In addition, 45% of respondents said their DB plans remain open to new employees, while 13% said they have frozen their plans to new employees and current employees are not accruing any benefits.

The survey was based on interviews with 174 senior finance executives in the U.S. and Europe and in-depth interviews with executives at 11 companies including Eli Lilly & Co., Motorola Corp., GlaxoSmithKline PLC and Time Warner Inc. Interviews began in the fourth quarter and ended in February.

ABP sheds stock of cluster-bomb makers

Stichting Pensioenfonds ABP, Heerlen, Netherlands, will divest companies that are involved in the manufacture of cluster bombs, according to the pension fund’s annual report, released April 13.

The move was a response to increasing public pressure that began in March, when a Dutch TV program reported that ABP and other pension funds were investing in the weapons industry. Since then, ABP officials announced they had divested holdings in companies that manufacture land mines. Spokesman Thijs Steger could not be reached by press time for information on specific stocks.

Financial results from the annual report indicate the pension fund returned 9.5% in 2006 with assets totaling €208.9 billion ($282 billion). The fund returned 12.8% for 2005. Equities returned 13.5% last year, according to the annual report. Infrastructure fared the best out of the alternative investments, with a return of 41.3%, while commodities fared among the worst, returning -18.5%.

Court orders Dana contributions

Dana Corp., Toledo, Ohio, was ordered by U.S. Bankruptcy Court in New York to contribute $5.2 million to certain non-union employee defined benefit plans, according to court documents. The court also ordered the auto parts maker to contribute $487,000 by Sept. 14 to three pension plans in connection with the sale of the company’s engine parts business to Mahle GmbH; Dana is responsible for the plans’ 2006 pension contributions, according to the court.

Dana, which filed for Chapter 11 bankruptcy protection in March 2006, has $2.5 billion in pension assets, according to the 2007 Money Market Directory.

Dow denies interest in LBO

MIDLAND, Mich. — Dow Chemical Co. executives have no interest in a leveraged buyout, said Andrew Wood, Dow spokesman. But Mr. Wood would not comment on details of a report by a British tabloid newspaper that the chemical company would receive a bid this week of $52 to $58 a share from a consortium led by Kohlberg Kravis Roberts. KKR officials declined comment, according to Ruth Pachman, spokeswoman.

The buyout would be the largest ever, second only to the pending $32 billion buyout of TXU Corp., a Dallas utility company.

Assets up, liabilities down

The typical U.S. pension plan’s assets rose 0.8% while liabilities decreased 1.8%, driven by an 18 basis-point increase in the yield for the 30-year Treasury bond, according to Pittsburgh-based Mellon Financial’s pension liability indexes.

“The rebounding stock market and rising interest rates put the typical U.S. pension plan back in positive territory for the year,” Peter Austin, executive director of Mellon Pension Services, said in a news release. “Pension plans seeking to reduce their exposure to the volatility of the markets will need to pay closer attention to matching their assets and liabilities.”

For the first three months of the year, the funding status of a typical U.S. pension plan improved by about 1.7%, matching the increase in assets as liabilities held steady.

CalPERS alters emerging markets lists

SACRAMENTO, Calif. — CalPERS added Morocco to its list of permissible public markets and removed Sri Lanka. The fund named 20 emerging markets to be included on its list of permissible countries, confirmed Clark McKinley, spokesman. In determining what countries go on the list, fund officials and general consultant Wilshire Associates look at factors including political stability, productive labor practices, market liquidity and market regulation, according to a Wilshire memo to the board, to be discussed at the April 16 board meeting. The rest of the list remained unchanged. The $235.5 billion California Public Employees’ Retirement System, Sacramento, invests $4.6 billion in emerging markets equities, said Mr. McKinley.

Also, CalPERS’ hedge fund returns beat the custom benchmark in all periods in the three years ended Feb. 28. Its absolute-return program returned 3.85% for the quarter vs. 2.42% for the benchmark; 2.2% for the two months of 2007 vs. 1.71% for the benchmark; 11.85% for the year vs. 9.96% for the benchmark; and 10.07% for the three years vs. 7.67% for the benchmark.

The data is included in supplemental reporting documents posted on the fund’s website in advance of the April 16 investment committee meeting.

Separately, the fund’s global real estate portfolio outperformed the NCREIF Property index by 15.7 and 17.2 percentage points for the one- and three-year periods ended Sept. 30, 2006, according to a review by Pension Consulting Alliance, the fund’s real estate consultant. A staff memo to the board attributed the returns to a shift toward non-core investments but noted the fund has taken on larger amounts of leverage and risk. The overview is part of a strategic review of the fund’s $18.3 billion real estate portfolio.

Sudan divestment battle

Berkshire Hathaway Inc. shareholders will vote at their May 5 annual meeting on a shareholder proposal to sell the firm’s 1.3% stake in PetroChina Co. Ltd., a subsidiary of China National Petroleum Corp. The resolution seeks to force Berkshire Hathaway to divest shares of companies with ties to the Sudanese government. Berkshire Hathaway’s board opposes the proposal.

Berkshire Hathaway’s PetroChina holding is valued at $3.3 billion.

Colorado Fire and Police keeps eye on 3

GREENWOOD VILLAGE, Colo. — Fire and Police Pension Association of Colorado put active equity managers Fiduciary Asset Management, Morgan Stanley (MS) Investment Management and Thomson Horstmann & Bryant on watch for performance, said Bill Morris, CIO of the $3.2 billion fund. Fiduciary Asset Management runs $176 million in domestic large-cap core; Morgan Stanley, $127 million in international; and Thomson Horstmann & Bryant, $47 million in domestic small-cap core. Firms typically have about 12 months to demonstrate improved performance before being re-evaluated.

Charles Walbrandt, president of Fiduciary Asset Management; Glenn Burrell, spokesman for Thomson Horstmann; and Jim O’Brien, spokesman for Morgan Stanley; all were unavailable for comment at press time.

2006 funded status improves

The funded status of the 100 largest publicly held U.S. companies with defined benefit plans to 99.7% in 2006, according to a study from actuarial and consulting firm Milliman.

The number of companies with a surplus in their defined benefit plans jumped to 40 from 20, but is still far below the 90 companies with a pension surplus at the end of 1999, said John Ehrhardt, principal and consulting actuary in Milliman’s New York office.

The plans were helped by strong returns in 2006, which averaged 12.8%. Returns from the individual plans ranged from 18.1% at Electronic Data Systems Corp. to 4.3% for Merrill Lynch & Co. Inc.’s defined benefit plan. Mr. Ehrhardt noted Merrill Lynch’s returns were lower because the bulk of the plan’s portfolio is invested in fixed income.

The defined benefit plans in the study had a median equity allocation of 63.8% and a median fixed-income allocation of 29.3%. The remainder was allocated to other asset classes, including alternatives and cash. The study noted the median discount rate moved to 5.75% in 2006 from 5.5% in 2005. That increase should lead to a lower pension expense for companies in 2007, Mr. Ehrhardt said.

Martingale put on watch by Kansas City Schools

KANSAS CITY, Mo. — Kansas City Public School Retirement System put Martingale Asset Management on watch for performance, according to minutes of the plan’s Feb. 12 meeting. The firm manages small-cap equities for the $830 million system; no further information was available. Executive Director Cecilia Carter could not be reached for details, and Martingale spokesman Tom Cosmer was not available at press time for comment.

Calamos assets drop

Calamos Asset Management had $42.6 billion in assets under management as of March 31, down 4.7% from the previous quarter and 10.5% from the previous year. Separate account assets totaled $10.5 billion, down 7.9% for the quarter and 13.9% for the year, while mutual fund assets totaled $32.1 billion, down 3.6% for the quarter and 9.3% for the year.

Maryellen Thielen, a spokeswoman, declined to explain the drop in total assets, citing company disclosure policy.

San Joaquin County renews consultants

STOCKTON, Calif. — San Joaquin County Employees Retirement Association renewed the contracts of general consultant Strategic Investment Solutions and real estate consultant ORG Real Property. The board of the $2 billion fund retained SIS through March 2010 and ORG through March 2012, confirmed Annette St. Urbain, assistant retirement administrator and investment analysts.

ORG’s contract was set to expire at the end of March. The fund renegotiated its three-year contract with SIS, which would have expired in about a year, said Ms. St. Urbain. No search was conducted.

U.K. corporate pension deficits down

LONDON — Total pension deficits among the U.K.’s top 100 companies fell to £21 billion ($41.34 billion) — the lowest level in five years — with 25% of the companies surveyed reporting a surplus in their corporate final-salary pension plans, according to a survey released by Deloitte & Touche.

Buoyant stock market returns and a fall in the price of bonds have helped boost corporate final-salary pension funds in the U.K., according to the survey.

“A surplus can be a headache for the company, as it is near impossible for the employer to take a refund from a pension scheme,” David Robbins, pensions partner, said in a news release about the survey. “The surplus could effectively be stranded.”

Deloitte advised corporate sponsors “to start looking now at strategies which reduce the risk of a stranded surplus arising,” including using assets such as real estate to provide security to the pension fund rather than making cash contributions, according to the news release.

Spokeswoman Ali Agmen-Smith couldn’t be reached for comment.

Anchor Hocking plan to PBGC

The PBGC assumed responsibility for the underfunded Anchor Hocking Pension Plan for Union Employees. Anchor Hocking, a unit of Global Home Products LLC, Westerville, Ohio, has missed $5.7 million in required contributions since its inception in 2004 and the fund is about 13% funded, with $1.3 million in assets to cover $10.1 million in benefit liabilities, according to PBGC spokesman Jeffrey Speicher. The PBGC expects to be liable for about $4 million of the shortfall.

Global Home Products and Anchor Hocking filed for Chapter 11 bankruptcy protection in April 2006 and the Anchor Hocking assets were sold to a unit of Monomoy Capital Partners, a New York-based private equity firm, last month.

Futures, options to boom, report says

WESTBOROUGH, Mass. — The use of futures and options is set to skyrocket as 130/30-type strategies are being increasingly employed by even traditional, long-only fund managers, according to a new report by the TABB Group, a financial markets research and advisory firm. Long-only funds often compete for assets under management with hedge funds, which typically use derivatives to enhance returns. That is forcing more conservative long-only managers to look toward equity derivatives to generate alpha, preserve capital and manage risk, the study found.

The report was based on in-depth interviews with 55 traders at hedge funds and at money management firms that trade equity derivatives.

Deals help prop up market, report says

NEW YORK — Corporate deal activity “has been helping to push equity markets higher despite evidence of slowing economic and earnings growth,” said Bob Doll, vice chairman and global chief investment officer of equities at BlackRock (BLK), in a report released last week.

In the quarter ended March 31, there was more than $1 trillion of reported deal activity, on par with the fourth quarter of last year, “marking the first back-to-back quarters at that level since 2000,” he wrote in the report.

Mergers and both public and private buyouts have been “driven by a combination of high levels of cash available to companies and attractive equity valuation levels,” he said in the report. “In our opinion, this environment is likely to persist until either the availability of capital dries up or until equity valuations rise considerably.”

Driscoll’s firm gains investor

Guggenheim Partners took a “significant” stake in Logan Circle Partners, the money management firm launched recently by Jude T. Driscoll, former CEO of Delaware Investments, said Guggenheim spokesman Jeff Kelley. Mr. Kelley declined to provide details.

In a written statement from Guggenheim, Mr. Driscoll said the tie-up will allow Logan Circle to focus on building its asset management practice while receiving infrastructure support and other expertise from a partner with “demonstrated success” at nurturing entrepreneurial investment managers. Mr. Driscoll couldn’t immediately be reached for further comment.

ISE to launch options on foreign exchange

NEW YORK — International Securities Exchange on April 17 will start trading options on foreign exchange, which will allow market participants and institutional investors to hedge their exposure to foreign markets. The new cash-settled options, ISE FX Options, will include pairs involving the U.S. dollar vs. the euro, the British pound, the Japanese yen and the Canadian dollar, said ISE spokeswoman Molly McGregor.

Timber Hill, the proprietary trading unit of Interactive Brokers Group, will be primary market maker for the new options, while Citigroup Derivatives Markets, Lehman Brothers and Optiver US will be competitive market makers.

Report pushes new template for earnings

WASHINGTON — Corporations should adopt a standard template for reporting quarterly earnings to dispel capital markets’ “short-termism” — “corporate and investment decision-making based on short-term earnings expectations” that interfere with the creation of long-term value, according to a joint report by the CFA Institute Centre for Financial Market Integrity and the Business Roundtable Institute for Corporate Ethics.

The organizations developed the template, which they detail in their report “Apples to Apples: A Template for Reporting Quarterly Earnings.” The report is available on their websites, and

“As the quarterly reporting process stands today, we fear that too many investors make short-term trading bets based on headline numbers,” Kurt Schacht, managing director of the CFA Institute Centre for Financial Market Integrity and a co-author of the report, said in a statement. “The recommendations improve the clarity of reporting, without materially increasing reporting expense. When the SEC adopted (Regulation G, effective 2003), it directed companies to be clear and reconcile any non-GAAP numbers they report” to the most directly comparable GAAP financial measures.

Carlson shutters fund of funds

Carlson Capital, a multistrategy hedge fund manager, is closing its hedge fund-of-funds business to external clients, said Jonathan Morgan, a spokesman. The firm will return about $29 million to outside clients and “continue to focus our efforts on our core business,” Mr. Morgan said. Carlson’s family of Black Diamond hedge funds, which has $3.1 billion in assets under management, is unaffected.

Boutiques to stay separate

Bank of New York’s four investment boutiques — Ivy Asset Management, Urdang Capital Management, Estabrook Capital Management and Alcentra Group — will remain separate entities after the bank merges with Mellon Financial this summer, said Joe Ailinger, a spokesman.

Big pay boost for S&P 500 CEOs

PORTLAND, Maine — CEOs of S&P 500 companies saw their compensation rise 23% in 2006, according to a study of preliminary data by The Corporate Library. Median CEO compensation at the 1,048 companies studied — including 179 companies in the S&P 500 — rose 9.29% in 2006, down from the median 15.98% increase for 2005. The study is based on proxy statements of U.S. corporations filed between Aug. 1 and March 23.

Among overall companies, “the latest figure indicates that the pace of growth is moderating,” Paul Hodgson, senior research associate at The Corporate Library and author of the report, said in a statement. “We haven’t stopped, and we’re certainly not in reverse. Even so, this is the first year we have seen possible single-digit increases since 2002.”

CAM, NewMarkets in JV

CAM Private Equity entered into a joint venture with NewMarkets Partners to start a new U.S.-based private equity emerging markets fund-of-funds business and launch a new private equity emerging markets fund, said Marie-France Mathes, managing partner of NewMarkets Partners. The $350 million to $400 million CAM NewMarkets I fund of funds will invest in countries in the early stages of private equity investing, including Japan, Australia and Korea.

Companies issue fewer stock options, Greenwich says

GREENWICH, Conn. — U.S. companies have cut back their use of stock options for employee-based compensation plans while expanding restricted equity awards and performance share programs, according to a Greenwich Associates study. Almost 45% of the companies studied have decreased their use of stock options as a result of FAS 123R, a new Financial Accounting Standards Board rule requiring that stock options be expensed on income statements, increasing the cost of issuing stock options to employees, according to a news release about the study. But 52% of the companies continue to offer incentive and non-qualified stock options to certain employees.

Greenwich surveyed 128 large companies between last September and December, said Joan Weber, spokeswoman.

$133 million in pension benefits unclaimed, PBGC says

WASHINGTON — The PBGC has $133 million in unclaimed pension benefits for 32,000 people owed money from terminated pension plans over the past 12 years. People who may have lost track of benefits earned from former employers can check the PBGC’s interactive search directory at

Judge orders pension assets returned

CHATTANOOGA, Tenn. — Dan Geiger was ordered by a U.S. District Court judge in Chattanooga to restore $4.8 million, including interest, to the pension plans of now-defunct Standard Coosa Thatcher Yarns Inc., according to a Labor Department news release. The March 20 decision by Judge Curtis L. Collier also permanently barred Mr. Geiger from providing services or serving as a fiduciary to any ERISA plan, according to the news release.

The Labor Department filed a civil lawsuit against Mr. Geiger in 2004, claiming SCT Yarns invested pension money in several businesses co-owned by Mr. Geiger and SCT owner Kenneth H. Combs Jr. SCT Yarns, located in Chattanooga, sponsored two pension plans, both of which have been taken over by the PBGC. The asset sizes could not be learned by press time.

According to the news release, Mr. Geiger is currently serving a nine-year sentence in federal prison for criminal activity related to the plans. M. Engin Derkunt, Mr. Geiger’s lawyer, said Mr. Geiger will “probably appeal the criminal case but not the civil case.”

Mr. Combs pleaded guilty to several criminal charges related to the pension funds in 2004. He fatally shot himself before sentencing.

Compustat adds pension health data

NEW YORK — Standard & Poor’s Compustat database added six categories that show the funded status of pension plans and other postretirement benefits that corporations must report on balance sheets under newly adopted Statement 158 of the Financial Accounting Standard Board, according to an S&P statement. The “new standard has the potential to lead to a large erosion in stockholders’ equity and also present significant comparability issues,” the statement said.

The Compustat database, used by institutional money managers and analysts for investment analysis and models, has fundamental corporate and market data on 65,000 global securities.

JPMorgan Fund Services adds staff

BOSTON — JPMorgan Worldwide Securities Services will expand its fund services operation in Boston, adding 50 to 100 people. The firm will add staff in the areas of custody, investment operations and fund administrative services, said Pam Snook, a spokeswoman for JPMorgan. The expansion is the result of a number of major institutional clients being added recently. Since mid-2006, new clients included: MFS Investment Management, for custody, fund accounting and securities lending services; the Ohio state treasurer, for custody and accounting services for $92 billion in Ohio public fund assets; Charles Schwab Investment Management, for separately managed accounts with $180 billion in assets; Rydex Investments, for depository services from currency-based exchange traded products; and ProShares, for accounting, administration, transfer agency and custody services.