U.S. pension fund assets climbed to $6.4 trillion in the first quarter of 1997, up from $6.3 trillion as of the end of 1996, according to the Federal Reserve. Total private pension assets stood at $3.1 trillion, while state and local government pension plan assets were $1.8 trillion, according to the Fed's Flow of Funds report, released today. The report also shows ownership of corporate equities by private pension plans and state and local government plans climbed $68 billion to $2.5 trillion in the quarter. Mutual fund assets rose to $2.4 trillion from $2.3 trillion, while money market fund assets rose to $951 billion from $891 billion.
Fort Howard Corp., Green Bay, Wis., transferred $60 million of its 401(k) plan from the Bankers Trust Capital Appreciation Fund to the firm's Russell 1000 large-cap growth index fund. The investment advisory board originally wanted to hire an active large-cap manager and planned to hire a consultant to conduct a search. Plans were changed following the announcement of Fort Howard's merger with James River Corp., said Vincent Gentile, manager-treasury services. Fort Howard's plan has $800 million in assets and may be merged with James River's $400 million 401(k) plan. Future changes will be up to James River, he added.
Global pension funds will demand $2.1 trillion in net new investments by year-end 2000, one-half of which will be in cross-border equities, according to Goldman Sachs. Another one-third will be in domestic stocks, while relatively small increments will be in international bonds, real estate, cash and other asset classes. Demand for domestic bonds will shrink slightly, frustrating government efforts to raise cash to cover pay-as-you-go pension benefits.
Over the next five years, international pension investors will pour $300 billion into Japanese equities, $250 billion into U.S. stocks and $150 billion into U.K. equities. Goldman estimated U.S. pension funds will invest a net of $500 billion into U.S. stocks.
Demographics are expected to drive global pension assets to $12 trillion by year-end 2000 from $7.3 trillion at the end of 1995, said Goldman Sachs, based on data from InterSec Research Corp.
About 270 managers are seeking active domestic equity assignments with the California Public Employees' Retirement System, triple the number of managers participating in any previous RFP, fund officials said. Because of the huge response, preliminary evaluations will be completed in August rather than in June, as earlier announced. Some $6 billion in active domestic equity assignments are available. The RFP for passive domestic equity assignments of $1.2 billion is scheduled to be released June 18.
A New Jersey state judge threw out a request by trustees of the New Jersey Teachers' Pension and Annuity Fund to hire outside lawyers to help determine the impact of 1994 changes in pension law enacted by Gov. Christine Todd Whitman. Trustees had argued state Attorney General Peter Verniero, who normally would provide advice to the fund, had a conflict of interests because he also is the top lawyer for the governor's administration. In an opinion made public today, Judge Philip S. Carchman noted the pension board is in effect part of Ms. Whitman's administration, and the state government cannot sue itself. What's more, Mr. Carchman pointed out trustees' contention that they wanted to analyze the changes was ``disingenuous'' - what they actually wanted was to challenge the changes.
Equitable has completed the sale of its Equitable Real Estate Investment Management subsidiary to Lend-Lease Corp. The $400 million deal, announced in April, also includes two Equitable property management subsidiaries, its mortgage division and ERE Rosen, a REIT management firm. Equitable Real Estate had more than $16 billion in tax-exempt assets as of Jan. 1.