The Arlington County Retirement System, Arlington, Va., today decided to cut its tolerance for downside risk to -10% a year in a bad market from about -15%, even though it could cost the fully funded system about 1.1% in real annual returns. System trustees will decide on an asset allocation to implement the new risk tolerance in subsequent meetings.
The change was recommended by Ashford Capital, the fund's consultant. For the past five years, the fund earned more than 11% a year, the consultant pointed out. With the new risk tolerance level in place, the fund still hopes to earn about one percentage point more than its target 8% actuarial rate of return.
The system, with about $800 million in assets, also will create a core TAA portfolio with about 20% of fund assets. Trustees will decide how to fund the portfolio at the June 5 meeting.
Thomas & Betts Corp., Memphis, Tenn., approved a new asset allocation for its $175 million fund following an asset-liability study. The new asset mix is: 32.5% domestic bonds, 5% real estate, 5% high-yield bonds, 40% U.S. equities, 12.5% developing markets equities and 5% emerging markets equities.
Previously, the fund had less specific targets of 5% to 15% international equities, zero to 50% U.S. fixed income, 40% to 55% U.S. equity, zero to 4% real estate and zero to 2% cash.
The board will decide in another month if new managers will be needed, said Ellen Shea, treasury analyst.
The New York District Council of Carpenters, New York, was ordered by a U.S. District Court to shift $50 million from its welfare plan to three pension plans to compensate for improper transfers.
In a lawsuit filed in 1996, the Labor Department charged fund officials failed to repay money transferred to the welfare fund from the pension funds; improperly paid leases with pension fund assets on luxury vehicles and other items; and failed to create leases and collect rent owed to the pension and other funds. The judgment also requires the trustees to create procedures to assure expenses are properly documented and paid for. The pension funds have assets of more than $1 billion.
The median manager in the Non-U.S. Equity Universe of InterSec Research posted a 0.5% return in the first quarter, beating the MSCI EAFE index by two percentage points. For the quarter, EAFE returned -1.5%, InterSec said. Currency management, market allocation and stock selection all contributed to the good performance, InterSec reported.
PanAgora Asset Management dropped its equity allocation to zero in its tactical allocation model, the lowest level in its 12-year history, said Edgar E. Peters, direct asset allocation and chief financial strategist. PanAgora manages $5 billion in TAA. Before the change, the model had an above-average allocation to equities, depending on client preferences. The change shifts the allocation to mainly bonds and a little cash. PanAgora is concerned over continued optimistic earnings forecast despite the Fed's recent restrictions to slow the economy and lower inflation.
Morgan Stanley Asset Management no longer is accepting new clients for its global emerging markets equities products. However, the firm will honor all RFPs for emerging markets assignments received by May 30, and current clients will be able to make additional investments. Emerging markets regional equity and debt offerings remain open. The firm will revisit this issue at regular intervals, a statement said.
Growth stocks outperformed value so far this year, according to Standard & Poor's. The total return for the S&P 500/BARRA Growth Index for April was 8.07%. The index's total return for the year to date was 11.94%. The total return for the S&P 500/BARRA Value Index for the month was 3.75% and for the year to date, 5.58%.
The total return for the S&P 500 for the month was 5.97%, and for the year through April 30, 8.81%. The total return for the S&P SmallCap 600 Index for the month was 1.23%, and for the year through April 30, -4.4%. The total return for the S&P MidCap 400 Index for April was 2.59%; the total return for the MidCap 400 for 1997 through April 30 was 1.07%.