President Clinton's emphasis on pensions in his State of the Union address might have been a trial balloon for floating the issue in this year's presidential race, suggests Ann L. Combs, principal in the Washington office of William M. Mercer. Ms. Combs was deputy assistant secretary in the Labor Department's pension office in the Bush administration. ``The White House is hoping to make pension protection, coverage and portability issues in the 1996 campaign,'' Ms. Combs noted in a memo to clients. Zurich Insurance Group combined Kemper Asset Management with Centre Investment Services, an insurance asset management specialist owned by Zurich. Zurich agreed to buy Kemper Financial Services last May; Kemper Asset is a subsidiary of Kemper Financial. The combined entity is called Zurich Investment Management, and has $34 billion in institutional assets. Laurence Cheng, executive vice president and CFO of Centre, was named president. John Angley, president of Kemper Asset, will become an executive vice president of the combined firm. Kemper's London-based global fixed-income manager, Kemper Investment Management, will be renamed Zurich Investment Management. Meanwhile, Kemper Financial Services will be renamed Zurich Kemper Investments. The $6.6 billion State Universities Retirement System of Illinois, Champaign, reported an overall return, net of fees, of 25.8% for the year ended Dec. 31, according to data released by the system. The fund's composite benchmark was up 24.6% for the year. (The composite is a blend of the Wilshire 5000, the Lehman Aggregate Bond Index, an Ennis Knupp real estate index and the EAFE 50% hedged index.) A public funds index run by Ennis Knupp was up 23.4% in the same period. CIO Kenneth E. Codlin said the Illinois SURS fund tries to invest in growth, and in 1995 it seemed to work out using an active management style. The system's strategic allocation is 50% U.S. stocks, 10% international stocks, 5% real estate equity and 35% bonds. Mr. Codlin said it's possible the fund may raise its equity allocation, perhaps to 70%, but nothing has been decided yet by the board. Longer term, the Illinois SURS portfolio had annualized returns of 11.1% for the three years ended Dec. 31, 12% for five years and 11.4% for 10 years. The fund's composite benchmark had annualized returns of 11%, 11% and 10.3%, respectively, while Ennis' public fund benchmark was up 10.5%, 12% and 11% for the same periods. Arthur H. Kroll, a leading executive compensation expert, has formed an executive compensation and employee benefits consulting firm. His first clients include Citibank and Mobil Oil Corp., he said. The clients couldn't be reached for comment. KST Consulting Group, based in New York, will advise on the development of pension plans and restructuring plans as a result of corporate mergers, among other areas. Before forming the firm, Mr. Kroll was a partner in the employee benefits area at the law firm of Pryor Cashman Sherman & Flynn and was chairman of the American Bar Association's subcommittee on executive compensation. Larger-capitalization stocks substantially outperformed smaller-cap equities in 1995, explaining in part why active managers in general underperformed the S&P 500, according to a study by Patricia Shangkuan, a Goldman Sachs analyst. On an equal-weighted basis, the way active managers typically form portfolios, the price return of the S&P 500, excluding dividends, was only 29.3% last year, compared with 34.1% on a cap-weighted basis. That gap also tended to put active managers at a disadvantage to the benchmark. In terms of market cap, the price return of 50 stocks in the largest, or first, decile was 39.3% for the year. The poorest performance came in 150 stocks in the last three deciles, with returns of 22.2% for the eighth decile, 22.3% for the ninth decile and 23.3% for the 10th. The $3.3 billion Oklahoma Teachers' Retirement System, Oklahoma City, hired Brandes Investment Partners to invest an $85 million international equity portfolio. CIO Jo Witt said Brandes will have an EAFE mandate. Funding came from cash flow. Mercer assisted. The C$766 million (U.S. $559 million) pension fund of B.C. Telecom Inc., Burnaby, British Columbia, nearly doubled its non-U.S. foreign equity allocation and hired its first specialty U.S. equity manager, said Garnet Andrews, cash and investments manager. The fund raised its non-U.S. exposure to 13.5% from 8%, adding to the assignments of Marvin & Palmer and Sprucegrove Investment . Also, it hired Institutional Capital Corp. to run U.S. equities, assigning it about 4%. Brockhouse & Cooper assisted in the U.S. search.
Funding came from reducing fixed-income and equity allocations
