PURCHASE, N.Y. - International Paper Co. named Robert Hunkeler as vice president and director of investments.
Mr. Hunkeler, who was head of the cash management, foreign exchange and corporate finance areas for Novartis Corp., fills the spot vacated by Joyce Nelson in August 1995.
Novartis was formed through last year's merger of Sandoz Corp. with Ciba-Geigy Corp. Before the merger, Mr. Hunkeler managed Sandoz Corp.'s $850 million in defined benefit pension assets and also oversaw $650 million in 401(k) plan and other employee benefit trusts.
"International Paper really wants senior financial executives to have a diversified background in a number of disciplines, and Bob clearly fits that mold," said Marianne M. Parrs, International Paper's chief financial officer.
Mr. Hunkeler, who starts his new job Feb. 3, has an ambitious agenda for managing IP's $3.3 billion defined benefit pension plan and $1.8 billion in 401(k) assets.
He plans to combine active investment strategies like market-neutral investing with low-cost indexation.
"I think market-neutral has a lot of promise," Mr. Hunkeler said, noting he had intended to move Sandoz's pension plans in that direction before the merger. He did, however, take the first step of overhauling Sandoz's pension plan by shifting $210 million into passive management, so that by the beginning of 1996, 35% of the pension assets of the Swiss pharmaceutical giant's U.S. subsidiary were passively managed.
Although Mr. Hunkeler and Ms. Parrs had not discussed in detail their ideas for the company's pension plans, the company already has moved in the direction suggested by Mr. Hunkeler, indexing a fairly significant portion of its domestic equities portfolio in the past 12 to 18 months, said Ms. Parrs. She declined, however, to say whether market neutral would be a logical next step.
Mr. Hunkeler also said he hopes to explore new asset classes.
"I don't believe in taboos, so any legitimate asset class should be considered," he said.
He also said he would like to explore the use of leverage by "applying the theory of the Capital Asset Pricing Model to its logical conclusion." The model, an important element of modern investment and portfolio theory, attempts to explain how securities should be priced, based on their relative riskiness in combination with the use of risk-free assets.
Mr. Hunkeler said he would like to manage the costs of running International Paper's pension funds by renegotiating fees with managers, using performance-based fees when possible and instituting commission recapture programs.
Mr. Hunkeler said International Paper's large exposure to company stock, in both its 401(k) plan and its defined benefit plan, is an area he intends to examine. (Federal pension law prohibits a defined benefit plan from having more than 10% of its assets in company securities.)
Ms. Parrs confirmed the defined benefit plan's investments in company stock have grown to more than 10% of total assets because of the market's upswing.
And 53% of the company's 401(k) plan assets are in company stock.
In January, the company added two investment options to its 401(k) plan - Harbor Capital Appreciation Fund, a domestic growth stock fund managed by Harbor Capital Advisors, Toledo, Ohio, and Janus Overseas Fund, managed by Janus Capital Corp., Denver. Company stock and the other three existing options were retained. The retained funds are: a stable value fund (managed by Bankers Trust Co., New York; Sanford C. Bernstein & Co. Inc., New York; and PIMCO Advisors Institutional Services, Newport Beach, Calif.); the Vanguard Wellington fund, managed by Wellington Management Co., Boston; and Vanguard's Standard & Poor's 500 Institutional index fund.
With the new options, the company also dropped a rule that required employees to put the first 8% of their 401(k) contributions in company stock. But matching contributions, about 60 cents on the dollar for most employees, will continue to be paid only in company stock, she said.
Novartis is looking to replace Mr. Hunkeler as soon as possible, said William J. McHugh, head of the company's employee benefit plans. Mr. McHugh, who worked with Mr. Hunkeler at Novartis, and previously at Ciba-Geigy, predicted Mr. Hunkeler would do well at International Paper.
"The job at International Paper is a very attractive position and it suits Bob's background very well. Bob is very strong in all areas of finance, but has a particular love for the pension side," Mr. McHugh said.