SACRAMENTO, Calif. - The California Public Employees' Retirement System temporarily yanked investment management of $1 billion in fixed income from Baring International Investment Ltd., a division of Baring Asset Management, and turned over the money to existing manager Warburg Investment Management International Ltd.
Staffers at the $80 billion fund said they no longer know the status of the fund's contract with Baring.
Barings PLC, the parent of Baring Asset Management, went into bankruptcy protection following a $1 billion trading disaster by Baring Securities, another Barings PLC division. Barings PLC later was acquired by Internationale Nederlanden Groep, Amsterdam, a Dutch financial services company.
In connection with the Barings bankruptcy, the California fund also:
Told its four securities lenders - Bankers Trust Co., Mellon Trust, Metropolitan West Securities and State Street Bank & Trust Co. - not to use Barings Securities as a counterparty in securities lending. It also made sure all securities on loan to Barings Securities have been returned. Bankers Trust redeemed $15 million in securities on loan to Barings Securities as of Feb. 27.
Told its managers to cease trading with Barings Securities.
Told Baring International Investment Ltd. not to trade in the California employees' account without approval from the pension fund.
Discovered it had two foreign exchange positions open in its BAM account but told custodian State Street Bank to settle the positions, which it did.
The fund's staff has found its errors and omissions policy and BAM's fidelity bond are both intact. The staff also is looking into whether the fund's contract with BAM automatically terminated as a result of the parent's bankruptcy and other administrative proceedings.
But Wilshire Associates, the fund's general consultant, said it would be premature to end the relationship with BAM on the basis of the bankruptcy. They said BAM hasn't suffered any trading or client losses.
However, pension fund staffers said they will help assess the fund's position and relationship with BAM.
The Baring changes came as a result of a three-day meeting of trustees. In other action:
Pension fund staffers are recommending the fund tighten its cash collateral investment guidelines on securities lending and reduce from four to two the number of securities lending agents now used. The staff also asked trustees to consider issuing a new request for proposals incorporating the staff recommendations before November.
Fund staff and Wilshire recommended against issuing an RFP for core domestic equity managers and small and emerging managers, which hold $5.2 billion in fund assets. The contracts expire at the end of this year but might be extended.
The system will conduct a search for a real estate consultant this fall. The search is to be completed in mid-1996 when contracts expire for incumbents Pension Consulting Alliance and Kenneth Leventhal. Both will be allowed to bid.
The system extended its custodial contract with State Street Bank for one year. Fees will remain at $4.9 million a year. The staff said State Street has "performed very well" for the pension fund.
Trustees voted unanimously to amend their travel policy.
Official travel by board members now must be approved by the president and vice president and submitted to the full board for approval by a majority at the next monthly board meeting. Previously, the president, general counsel and chief executive officer approved travel. The new policy also eliminates an ad hoc travel committee of the board appointed by the president.
Also, board members must submit a detailed summary report within 60 days of an event requiring travel out of state.
Urgent travel needs will be approved by the board president.
Richard Koppes, deputy executive officer and general counsel of the fund, said the board saw "a need to tighten up (the travel policy) and make it more disclosure oriented."