WASHINGTON - The Internal Revenue Service issued a private letter ruling allowing Travelers Group Inc. to deduct the value of stock options it contributes to its profit-sharing/401(k) plan.
Labor Department officials expect to issue Travelers an exemption letter from ERISA prohibited transaction regulations by the end of March, clearing the way for the company to contribute stock options to its 401(k) plan.
In addition, a Travelers official said the company received several inquiries from large employers - including IBM Corp., GTE and Lucent Technologies - seeking information about the stock option contribution.
New Mexico postpones
SANTA FE, N.M. - The $5 billion New Mexico Public Employees Retirement Association retained existing small-cap growth manager IDS and canceled a search for a small-cap value manager, said Jeff States, investment director.
The action was taken because trustees of the $5 billion fund are awaiting the results of an asset allocation study being conducted by Wilshire Associates.
In addition, Mr. States said legislation pending in New Mexico that would extend its maximum allocation to international equities beyond the current 10% limit could affect its asset allocation decisions in coming months.
San Francisco boosts
SAN FRANCISCO - The $8 billion San Francisco City & County Employees' Retirement System increased its equity target at the expense of fixed income.
The target allocation for equity investments was increased to 62% from 59%, while the fixed-income allocation fell to 38% from 41%.
Clare Murphy, chief executive officer, said it's possible trustees might look into manager searches for international equity and high-yield commercial mortgage-backed securities assignments as a result of the changes, but nothing has been planned or scheduled yet.
Pacific Financial Research
acquired by UAM
BEVERLY HILLS, Calif. - United Asset Management, Boston, reached agreement to acquire Pacific Financial Research, Beverly Hills.
Terms weren't's disclosed.
Pacific Financial manages $4.2 billion in equity and balanced portfolios. All of its 25 staffers and its five principals will remain with the firm.
Also, UAM increased assets under management by $28.9 billion in 1996 despite a $3.3 billion drop in client cash flow. UAM assets grew to $171 billion from $142.1 billion. The asset losses did not hurt revenue thanks to higher-fee assignments replacing lower-fee ones, a company statement said.
Annual revenue grew 20% to $883.3 million from $734.4 million at year-end 1995. Of the new assets, $11.8 billion was gained through acquisitions - including international managers OSV Partners, Clay Finlay Inc. and Rogge Global Partners - and another $17.1 billion through internal asset growth among the 45 UAM affiliates.
SEC reverses itself
on forced labor issues
WASHINGTON - The Securities and Exchange Commission reversed its position on employment-related proxy issues, ruling that companies cannot omit from proxies investor requests on child labor, sweat shops and other forced labor.
The SEC informed Dillard Department Stores, Little Rock, Ark., it cannot exclude a shareholder proposal asking the company to prepare a report on how it avoids foreign suppliers that exploit workers. The agency also informed Phillips-Van Heusen Corp., New York, that it cannot omit an investor request asking the company to reward top executives for implementing a policy to avoid overseas suppliers that use forced labor.
"We are pleased that they have recognized that sweatshop issues and child labor are not ordinary business," said Timothy Smith, executive director of the Interfaith Center on Corporate Responsibility, New York, which often sponsors shareholder proposals on various social issues.
SACRAMENTO, Calif. - The $111.5 billion California Public Employees' Retirement System named an independent auditor and an appraiser for its real estate portfolio in two separate actions.
Coopers & Lybrand was named as independent auditor by the fund's finance committee. Coopers & Lybrand was named to a five-year term and replaces Deloitte & Touche.
CB Commercial Real Estate and Cushman & Wakefield were picked as appraisers. The selections drops the number of real estate appraisers to two from 11; the move is expected to save $250,000-$425,000 a year. The fund also expects greater consistency in its appraisal reports.
Dallas city officials
submit actuarial studies
DALLAS - In the face of subpoena threats, Dallas officials turned over confidential actuarial studies to the Texas Pension Review Board.
The agency is moderating a dispute between fund trustees and the city. City officials claim the studies show the $1.3 billion plan is financially sound. Trustees claim the city's projected 9.2% annual return on investments is too high, and its own projected 8.25% projections is more realistic. Trustees claim the city's projections could lead to shortfalls over the next 30 years.
PRB officials are reviewing the city's information and plan to address the issue at an April 10 meeting.
'96 an excellent year
for office rents
CAMBRIDGE, Mass. - Real office rents rose 9.3% nationwide in 1996, the best yearly increase on record for the sector, according to CB Commercial/Torto Wheaton Research. Overall, no market saw rent decreases in 1996.
National vacancy rates for offices are still in the double digits, but fell 200 basis points to 12.1% from 14.1%, according to the research.
The top 10 major market rent increases in 1996 were Minneapolis, 28%; Columbus, Ohio, 26.6%; Dallas, 24.9%; Portland, Ore., 24.4%; Salt Lake City, 23.1%; Atlanta, 22.8%; San Jose, Calif., 22.6%; Phoenix, 22.4%; San Francisco, 21.9%; and San Diego, 20.4%.
Only an unrestrained construction boom or recession could cloud the outlook for the office sector, and few markets have enough building under construction to warrant concern, according to CB Commercial/Torto Wheaton.
PBGC to ask court
to terminate Monon plan
MONON, Ind. - The Pension Benefit Guaranty Corp. is expected to ask the U.S. District Court for the Northern District of Indiana to terminate the Monon Corp. pension plan and name the agency as the new trustee.
Monon is a Monon, Ind., manufacturer of truck trailers and container chassis. The plan has $9.5 million in liabilities and $2.9 million in assets.
The anticipated sale of most of Monon's assets by the U.S. Bankruptcy Court for the Northern District of Indiana would leave the plan with no sponsor to provide benefits, the PBGC contended.
Study says unions
credible in proxy dispute
WASHINGTON - Contrary to conventional wisdom that organized labor groups often use the shareholder proposal process to harass management and gain leverage in collective bargaining negotiations, a new study says other investors view them as credible and that they express legitimate corporate governance concerns.
The study was conducted by Randall S. Thomas, professor of law at the University of Iowa, and Kenneth J. Martin, finance professor at the New Mexico State University, of 192 proposals in the 1994 annual meeting season. It found that labor-sponsored proposals typically receive higher votes than those sponsored by private institutions and individuals, and about the same as those sponsored by public institutions.
Corporate management, the study noted, has vehemently protested proposals filed by labor union groups, "claiming that labor groups are engaged in 'corporate campaigns' to win concessions that have nothing to do with their share holdings and everything to do with their role as workers."
The study followed a 1995 petition by the American Trucking Association asking the SEC to prevent labor groups from filing shareholder resolutions at companies with whom they are involved in contract negotiations.
DARIEN, Conn. - RogersCasey realigned some of its businesses and lost its fourth consultant to Morgan Stanley Asset Management.
INVESTWORKS, its computerized manager search product, will become a separate affiliate of BARRA, RogersCasey's parent, said Todd Doersch, president and chief executive of RogersCasey Sponsor Services.
RogersCasey's alternatives group has moved to Symphony Asset Management, BARRA's investment management subsidiary. RogersCasey will search for researchers and consultants in alternatives as a result.
Meanwhile, Tim Barron, a managing director, will join Morgan Stanley as a vice president in the public fund marketing group. His duties will be reassigned, Mr. Doersch said. Also, Jonathan Tiemann was hired from Barclays Global to head up RogersCasey Asset Services, which provides fund-of-funds services. Mr. Tiemann was responsible for investment management, and product and business development in BGI's index strategies area.
American Express opens
products to vendors
MINNEAPOLIS - American Express Institutional Services for the first time will make its institutional retirement investment products available to outside 401(k) service providers such as banks, insurance companies, consultants and third-party administrators.
Robert Richey, senior vice president of investments, said about 35 American Express/IDS mutual funds and collective funds will be available.
OTC derivatives positions
increase 37% in '96
SYDNEY, Australia - Over-the-counter derivatives positions grew 37% in 1996, according to preliminary data compiled for the International Swaps and Derivatives Association.
Outstanding privately negotiated contracts in interest rate swaps, currency swaps and interest rate options carried a notional market value of $24.3 trillion as of Dec. 31, up substantially from 1995's $17.7 trillion, according to an ISDA statement.
The numbers were culled from ISDA members, mainly OTC dealers, by Arthur Anderson.
PBGC changes rate
for Top 50 list
WASHINGTON - The Pension Benefit Guaranty Corp. will be using a 5.8% interest rate assumption when valuing liabilities for its 1997 Top 50 list.
The list, expected by the end of the year, tallies companies with the worst funded plans. Companies have until Sept. 15 to make contributions to change their status. The assumptions reflect the cost of purchasing an annuity at the end of 1996. Last year, the agency used a 5.3% interest rate.
Separately, the PBGC is asking the public for comments on possible amendments to how it values benefits when terminating pension plans. The PBGC is considering new mortality tables to value benefits. Comments are being accepted until May 19.
Pension investors listed
for private equity fund
NEW YORK - Saunders Karp & Megrue, a private merchant bank, closed its second private equity fund, the SKM Equity Fund II, at $506 million.
Among the investors were the pension funds of AT&T Corp., NYNEX Corp., General Electric Co. and United Technologies Corp. Other investors were the State of Rhode Island and the endowments of the University of Texas and University of California. Specific investment amounts were not available.
The fund will invest in well-managed, middle-market companies, in partnership with management.