The Federal Reserve Board Open Markets Committee, as expected, today took no action to lower interest rates, leaving short-term rates steady at 5.75%. Most bond market sources did not expect the Fed to adjust rates in the midst of the budget confrontation between Congress and the Clinton administration, even though some believe economic conditions may warrant a rate cut later this year.
The $125 million Les Schwab Tire Centers profit-sharing fund, Prineville, Ore., is considering a move to outside management for fixed income, said Jim Goad, manager-finance. The fund runs about $2 million internally in fixed income, but could increase its allocation as part of the consideration to hire an outside manager. The pension board could make a decision next month on the move and start a search for a manager. R.V. Kuhns & Associates is assisting.
The PBGC has taken over the UPI Guild Employees Retirement Income Plan, underfunded by $5 million. The Washington-based news agency's Guild Employees Retirement Income Plan covered about 1,300 former news staff, including 350 retirees. The plan had $18 million in assets, and $23 million in liabilities. Most participants will not get full benefits because the guild plan's 1989 benefit increase was only partially guaranteed. The company filed for bankruptcy in August 1991. In October 1994, the PBGC took over UPI's plan for management staff; at the time it was underfunded by $9 million.
The reorganization of Bankers Trust's investment management operations is not expected to affect the day-to-day activities of its U.S. operations. The U.S. office will continue to be responsible for the management of domestic products and the marketing and client service in the U.S. market, said Ian Martin, the new global head of investment management. Mr. Martin, formerly the head of funds management at Bankers Trust Australia, replaced Ivan Wheen, who is moving to Singapore to head Bankers Trust's business strategies for Southeast Asia. Mr. Martin said the restructuring will integrate the manner in which products are presented to clients.
Voters in Maine passed an amendment to the state's constitution mandating that the Maine State Retirement System, Augusta, be fully funded in 31 years. The vote is not expected to affect the $3.9 billion fund's requirements, because it matches its current funding schedule, said Claude Perrier, executive director. But the amendment prohibits the creation of unfunded liabilities, preventing erosion in the system's funding. The amendment awaits the governor's signature.
Commodity price indexes have lost much of their power to predict consumer inflation, often ``sending perversely negative signals,'' according to two economists in a study published by the Federal Reserve Bank of New York.
Since the mid-1980s, commodities have been ``a poor leading indicator of turning points in inflation, sending more false signals than correct signals,'' said the study, written by S. Brock Blomberg, assistant professor of economics at Wellesley College, and Ethan S. Harris, an economist in the bank's domestic research division.
``Inflation hawks might more profitably focus on the unemployment rate and other signals for future inflation,'' the study said.
The decline in the importance of commodities as a share of final output and changes in monetary policy are among the reasons commodity prices have lost their predictive power, the study said.
NationsBank has formed a new investment management subsidiary, TradeStreet Investment Associates, aimed at institutions.
Andrew M. Silton, director of investment strategy for the bank's trust unit, will be president of TradeStreet. TradeStreet will offer domestic investment management and will serve as subadviser to NationsBank's Nations Fund mutual fund family.
In the next 12 months, the firm may hire one or two portfolio managers and perhaps business development and operations professionals. TradeStreet opens with $30 billion in NationsBank Trust assets.
Mr. Silton has not been replaced at NationsBank Trust and Investment Management, which will continue to run an additional $30 billion in assets for private clients and local and regional institutions.
CORRECTION: P&I Daily incorrectly reported yesterday that the Mississippi Public Employees Retirement System is looking for a REIT manager. Eddie Vandiver, deputy director of investments, said the fund is allowed to invest up to 5% in real estate, but it does not have plans to invest in the near future.
