TARRYTOWN, N.Y. - Novartis Corp., eschewing mutual funds entirely, will offer nine investment portfolios from more than 10 money managers when it consolidates its $2 billion in 401(k) assets.
Novartis will drop or has dropped two managers plus an in-house portfolio in the consolidation. It retained six managers, added three more and is still deciding the fate of four others.
Novartis - created from the merger of Ciba-Geigy Corp. and Sandoz Corp. - picked Northern Trust Co., Chicago, as trustee of the new 401(k), said William J. McHugh Jr., treasurer. Northern has been trustee of the Sandoz plan; Ciba had used Bankers Trust Co., New York. A record keeper still has to be chosen. A decision could be made by July.
Mr. McHugh hopes to merge the assets into one fund by Jan. 1. Until then, the 401(k) plans of Ciba, Sandoz and Gerber Products Co. - acquired by Sandoz prior to the merger with Ciba - will remain separate.
The new Novartis funds are:
Money market, managed by Bankers Trust;
Intermediate and short-term fixed income, managed jointly by J.P. Morgan Investment Management Inc. and Goldman Sachs & Co., both of New York;
Enhanced bond index, managed by State Street Global Advisors, Boston;
Tactical asset allocation, managed by J.P. Morgan;
Standard & Poor's 500 index, managed by Bankers Trust;
Small-company stock, managed jointly by Amerindo Investment Advisors Inc., San Francisco; Putnam Investments Inc., Boston; TCW Group, Los Angeles; LSV Asset Management, Chicago; and Rosenberg Institutional Equity Management, Orinda, Calif.;
Aggressive growth, managed jointly by Amerindo and Putnam;
International equities, to be managed by several managers not named yet; and
Novartis company stock, managed by Northern Trust.
All of the portfolios are separate accounts, except the enhanced bond index and S&P 500 index, which are commingled funds.
"We feel the structure gives us the greatest flexibility and cost effectiveness," Mr. McHugh said.
The structure will enable Novartis "to do detailed analytics on the managers and how they are adding value or not adding value. We will run normal" - or benchmark - "portfolios on them. It puts us in a better position to evaluate them and make changes if we need to."
Ciba-Geigy, which has about $1 billion in 401(k) assets, moved to most of the new Novartis investment options in January and the aggressive growth and enhanced bond index funds in March.
The Sandoz plan, which has about $700 million in assets, should convert to the new structure in the third quarter, and the Gerber plan, which has some $300 million, by year end.
Mr. McHugh said Novartis created the new 401(k) structure and hired the managers without using a consultant. Angela Howard, Novartis manager-investments, who directly oversees the company's employee benefit funds, was a leader in developing the new structure, he added.
Mr. McHugh has been an outspoken critic of bundled 401(k) approaches, suggesting some fund executives choose that route solely for administrative ease.
The consolidated Novartis plan will offer daily valuation and switching, telephone voice-response and computer access for participant allocation changes.
The new Novartis plan adopted some investment portfolios and managers from the Ciba-Geigy and Sandoz plans, while also offering some new ones.
The Sandoz plan's existing investment choices are:
Stable value, managed by J.P. Morgan, hired in March to replace Dwight Asset Management, Burlington, Vt.;
Diversified bond fund, managed by State Street;
Tactical asset allocation, managed by J.P. Morgan;
S&P 500 index, managed by Bankers Trust;
Small companies, managed by Investment Advisers Inc., Minneapolis, and Rosenberg Institutional;
International equities, managed by Brinson Partners Inc., Chicago; and
Novartis stock, managed by Northern Trust.
The Ciba-Geigy plan's investment choices are:
Money market, managed by Bankers Trust;
Intermediate income, managed jointly by Ciba-Geigy internally, Bankers Trust and Goldman Sachs;
Tactical asset allocation, managed by J.P. Morgan;
S&P 500 index, managed by Bankers Trust;
Small companies, managed by Bankers Trust and TCW;
International equities, managed jointly by Hotchkis and Wiley, Los Angeles, Schroder Capital Management International Inc., New York, and Putnam; and
Novartis stock, managed by Northern Trust.
The Gerber plan uses The Vanguard Group, Valley Forge, Pa., for investment choices, which weren't available.
Although all participants will have the same investment options, other benefits - such as the size of the company match - could vary among the 10 Novartis business units. Sandoz' existing structure is similar.
For record keeping, executives must decide among Sandoz's record keeper, Buck Consultants Inc., New York; Ciba-Geigy's, Benefit Services Corp., Atlanta; and Gerber's, Hewitt Associates L.L.C., Lincolnshire, Ill.
