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 equity and 5% emerging markets equities.
Previously the fund had less specificic targets of 5% to 15% international equities, zero to 50% domestic fixed income, 40% to 55% domestic 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 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 a new asset allocation to implement the risk tolerance in subsequent meetings.
The change was recommended by Ashford Capital Management, the fund's consultant. For the past five years, the fund has earned more than 11% a year. 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.
Trustees of the system, with about $800 million in assets, also approved creating a core TAA portfolio with about 20% of fund assets. Trustees will decide how to fund the portfolio ar the June 5 meeting.
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 managers $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 said it would 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 moratorium is not permanent. The firm will revisit this issue at regular intervals, a statement said.
WELLS FARGO Bank will expand its mutual fund families this year to fill all asset class niches, said Mike Neidermeyer, executive vice president. The first fund will be an internally managed, active international equity fund runby Kate Shapiro, who now manages international equity separate accounts. That fund will open in August. The company also is considering a domestic large-cap value equity fund and a high-yield bond fund, said Mr. Neidermeyer. Additional personnel will be hired to manage the new funds.
THE MSCI WORLD Index climbed 3.1% in dollar terms vs. a 0.4% gain for the EAFE index in April. For the month, the MSCI Emerging Markets Free Index fell 0.2%.
Among developed markets, the three top performers were the U.S., 6.4%; Spain, 5.7%; and Japan, 3.6%. Laggards were Malaysia -11.3%; Sweden, -8.5; and Singapore, -5.4%. Among emerging markets, China's domestic free market shot up 22.2% in dollar terms, while Sri Lanka rose 15.4%. The Philippines free index fell 17%.
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.