In keeping its promise to cut management fees and boost earnings, the $621 million Vermont State Employees' Retirement Board, Montpelier, terminated Nicholas-Applegate Capital Management as an active global stock manager and is looking for a domestic stock index manager.
State Treasurer James H. Douglas also is looking for someone to study whether it would be more efficient to turn both the state employees' and teachers' funds into defined contribution plans.
After terminating Nicholas-Applegate, the Vermont employees' fund will place half of the $70 million the firm ran in a Standard & Poor's 500 stock index fund. Mr. Douglas said the board hopes to make a decision within a month on a new manager.
This change is expected to save the fund about $250,000 per year, Mr. Douglas said.
The remainder of what Nicholas-Applegate managed will be distributed among eight existing managers, Mr. Douglas said.
Nicholas-Applegate was terminated for lower-than-expected performance over a three-year period. Executives of the firm could not be reached for comment.
Meanwhile, the defined contribution study will be a two-stage project, Mr. Douglas said. The first will study the benefits of offering various combinations of plans including: a defined contribution and defined benefit plan; a defined benefit plan for current employees and a defined contribution plan for new employees; and transferring current members from a defined benefit plan to a defined contribution plan.
The results of the first phase will be presented to the Legislature Aug. 15.
Then, the Legislature will decide whether the second stage of the project is worth pursuing. Its goal is to examine how the state should implement the best alternative from the first part of the study.