The number of companies with fully funded pension plans increased in 1994 for the first time in six years, according to Buck Consultants' annual survey of large corporate plan sponsors. According to Buck, 75% of companies studied had fully funded defined benefit plans in 1994, compared with 60% in 1993. The number of fully funded plans had gradually declined from 95% in 1988. In addition, the Buck study found the average discount rate increased by almost a full percentage point to 8.3% in 1994 from 7.32% in 1993. The Buck study was based on information gathered from annual reports of 489 Fortune 1,000 companies.
The $59 billion California State Teachers' Retirement System, Sacramento, is expected next week to approve an RFP that would permit money managers to form joint ventures to run a passive emerging market index fund portfolio. The fund is seeking a maximum of two firms or joint ventures to invest an amount estimated to be more than $300 million.
In another development, the fund's staff is proposing a currency hedging program using currency forwards because non-dollar currency is expected to play an increasingly significant role in the fund's investment returns.
The pension fund is expected to increase the non-dollar assets in its portfolio to 25% of assets in the coming years, and the pension fund's total investment portfolio is expected to increase to $100 billion by the year 2010.
The CalSTRS board might approve a currency hedging policy Wednesday. The fund's staff is recommending that currency hedging transactions be done internally.
The board also will consider that day whether it should authorize the pension fund's staff to co-invest with the general partners in alternative investments. Currently, it invests in limited partnerships. No amount to be co-invested was mentioned.
The $2 billion Sacramento (Calif.) County Employees' Retirement System has made some fine-tuning as part of its recently completed bi-annual review of its $440 million of fixed-income investments, said CIO Christopher Ailman.
The fund reduced by $50 million what was a $95 million short-term portfolio managed by Payden & Rygel. As a result, Lincoln Capital, which manages a $215 million indexed bond portfolio, will receive $35 million, and Bradford & Marzec, which runs a $140 million core active fixed-income portfolio, will get another $15 million.
The moves are aimed at rebalancing the aggregate fixed-income portfolio's duration and credit risk so the portfolio better approximates the Salomon Broad Investment Grade Index, said Mr. Ailman.