Merger creates jumbo fund
A merger - announced July 3 - of Lockheed Martin and Northrop Grumman would create the nation's fourth largest pension fund, with nearly $40 billion in employee benefit assets.
If the merger follows others in the aerospace/defense industry, the $18.3 billion Lockheed Martin defined benefit plan ultimately will be merged with Northrop Grumman's $9 billion plan.
In addition, Lockheed Martin has about $9.3 billion in defined contribution assets and Northrop Grumman has about $3.2 billion.
Strauss gets PBGC nod
David M. Strauss was appointed executive director of the PBGC late last week.
"With his commitment to service and special understanding of issues important to workers and retirees, (Mr.) Strauss will build on the advances already made by the president to assure that retirement is secure for America's working men and women," said Labor Secretary Alexis M. Herman, who made the appointment.
GE deal gains $280 million
Thirteen institutional investors committed a total of $280 million to GE Investment Realty Partners IV. They include: the pension funds of Olin Corp. and General Electric Co.; Carnegie Mellon University's endowment; the Battelle Memorial Institute Inc., a pension fund; the Memorial Drive Trust, the retirement plan of Arthur D. Little Inc.; and Allendale Mutual Insurance Co.
The fund will make equity real estate investments in North America ranging from $10 million to $50 million.
FASB disclosure draft
The FASB issued for public comment last week its long-awaited proposal to increase disclosure of pension and post-retirement medical information in corporate financial statements.
To avoid duplicating or conflicting with ERISA, a proposal to require disclosure about concentration of pension assets in certain asset classes beyond a specified percentage, or large investments in a certain investment security was dropped.
Custody jobs consolidated
Royal Sun Alliance has consolidated custody of its (British pounds) 25.25 billion ($41.92 billion) of assets with Midland Securities Services and Chase Manhattan Bank.
The revamping follows the May 1996 merger of U.K. insurers Royal Insurance Holdings and Sun Alliance Group.
Losing accounts in the move were Bank of New York, whose (British pounds) 6 billion in U.K. equities has been transferred to Chase, and Morgan Stanley Trust, which lost custody of a (British pounds) 2.75 billion gilt portfolio to Midland.
In addition, the insurer plans to pick either Chase or Lloyds as custodian for its unit trusts.
Bell Atlantic fights suit
Bell Atlantic is asking a U.S. District Court in Philadelphia to throw out a class-action lawsuit alleging the company's cash-balance plan gave out smaller lump-sum payouts to some former employees because it used the wrong interest rates and actuarial assumptions to calculate those benefits. The plan specifically included "anti-cutback" provisions that protected participants' rights to include early retirement benefits, the company argued in court papers. What's more, since participants had no accrued right to a lump-sum pension before the company converted to a cash balance plan in 1995, the company's calculation of lump sums without taking early retirement subsidies into account "is not a cutback" under federal pension law.
Firm on watch list
Sacramento County Employees' Retirement System is placing Nicholas-Applegate on its manager watch list because of performance concerns, said CIO Jeffrey States.
Nicholas-Applegate manages $85 million in midcap growth equity for the $2.5 billion fund.
A firm spokesman said officials are trying to work through the issues with the county.
Sandy Lincoln leaves post
Seamon "Sandy" Lincoln has resigned from Lincoln Capital Management after serving less than a year as COO.
"We are all disappointed," said J. Parker Hall, Lincoln president and managing director. "He initiated changes that are of use to the firm and he's a first-class individual. But Sandy was a more ambitious builder than we thought appropriate at this time for Lincoln Capital."
The firm has started a search for a new COO. Mr. Lincoln could not be contacted.
Highmark to merge plans
Highmark Inc. plans to consolidate the retirement plans, totaling $550 million in assets, of the two entities that formed the new corporation - Blue Shield of Pennsylvania and Blue Cross & Blue Shield of Western Pennsylvania.
The company plans to begin an asset allocation study soon, said Thomas E. Lehman, manager-cash and banking. The goal is to consolidate the plans in 1998; Mr. Lehman expects changes in allocations and managers.
RogersCasey, which is doing a corporate study, could be tapped for the pension study.
Each has about $175 million in defined benefit assets and $100 million in 401(k) assets.
No managers overlap.
New freedom for funds
The Chicago Laborers' Annuity & Benefit Fund and the Chicago Municipal Employees Annuity & Benefit Fund now can operate under prudent person standards, following Gov. Jim Edgar's signing June 27 of House Bill 15.
James Stack, executive director of the $4.2 billion municipal fund, said: "I'm sure we will be changing our asset allocation." Earlier, James Capasso, executive director of the $1.2 billion laborers' fund, said his fund probably would review its asset allocation if the bill did become law. He did not return phone calls this week.
Louisiana taps IDS
The $5 billion Louisiana State Employees' Retirement System hired IDS Advisory to manage a $250 million growth equity portfolio, said James Wood, executive director.
Other finalists were Putnam, Fayez Sarofim and Lincoln Capital. The portfolio had been managed by Chancellor LGT.
New England Pension Consultants assisted.
Paris bank forms sub
Banque Nationale de Paris has formed a new money management subsidiary, BNP Gestion, with 254 billion French francs ($43.4 billion) in assets under management.
The new unit will be headed by Gilles de Vaugrigneuse, who was head of the bank's money management operation. Jacques Cachuex, formerly in charge of institutional marketing, will be CIO for the unit's 43 portfolio managers. Gilles Gilcenstein will be in charge of domestic and international marketing and business development.
Fund commits $25 million
Crown Cork & Seal committed $25 million to the Galen Partners III private equity fund for its $3.3 billion pension fund, said Peter M. Marks, director-corporate finance. The Galen fund specializes in the health-care industry.
Crown will fund the commitment through cash flow.
No consultant was used.
St. Louis enters small-cap
Reich & Tang will manage $20 million in small-cap value and Columbia $20 million in small-cap growth equity. Funding will come from existing managers; none will be terminated. Watson Wyatt assisted.
Providence hires for equity
The $270 million Providence Employees' Retirement System hired Boston Partners to manage $43 million in small- to midcap value equity.
The firm replaces Pioneering Management, said Boyce Spinelli, director of finance.
H.C. Wainwright & Co. assisted.
Oklahoma board hires
The $228 million Oklahoma State & Education Employees Group Insurance Board hired Chicago Trust to manage a $60 million intermediate-term bond portfolio. Assets were shifted from an unidentified terminated manager. Marquette Associates assisted.
Pa. fund curbs tobacco
Money managers for the Pennsylvania Public School Employes' Retirement System have been instructed by trustees to stop buying shares of tobacco companies.
The cap will remain in place until the investment staff receives a "clear direction" on the litigation and other issues facing the tobacco companies.
The fund owned $264 million worth of tobacco company stocks as of May 30.
2 new private equity funds
Two major players are planning to launch international private equity funds later this month.
AIG Capital Partners is looking to raise up to $1 billion for a Global Emerging Markets Fund, which will be a fund-of-funds for investing in direct equity. And Credit Suisse First Boston Private Equity is looking to raise $500 million to $600 million for its International Private Equity Fund, which would invest in established companies around the world.
MSCI World up 14.6%
The MSCI World Index advanced 14.6%in dollar terms in the second quarter, besting the performance of the EAFE, which gained 12.6% In contrast, the MSCI Emerging Markets Free index returned only 7.7%
During the quarter, Japan's 23.5%surge made it the best performer among developed markets, while Malaysia trailed with -12.1% Among emerging markets, Israel's non-domestic market (representing shares of Israeli companies traded in New York) was tops, with a 45.5%rise, while Thailand's 26%plunge put it in the cellar.
For the month of June, the World Index was up 4.9% just shy of EAFE's 5.4%rise. The Emerging Markets Free index advanced 5.1%
2 invest in housing fund
The General Board of Pensions and Health Benefits for the United Methodist Church and the Board of Pensions of the Evangelical Lutheran Church invested a total of $27 million in a State Street Global Advisors fund that will originate mortgages for affordable housing.
Loans created by the fund could produce as much as 4,000 units of new affordable housing in the United States in the next three years, said H. Peter Norstrand, head of State Street's real estate department.
The fund is seeking to raise $100 million.
Milwaukee seeks executive
Milwaukee Employes' Retirement System will be searching for an executive director following the retirement of Robert Nehls, said Pat Cronin, financial manager and assistant executive director. Mr. Cronin will be acting as executive director on an interim basis. System officials are still determining how the search will be conducted, he said.
Fund adding realty officer
Tennessee Consolidated Retirement Systems officials are interviewing candidates for a real estate investment officer to help fulfill the $18 billion fund's 5%target to real estate, said CIO Tom Milne.
The position is expected to be filled by August. The real estate officer will be responsible for identifying separate account relationships and evaluating real estate commingled fund investments, said Mr. Milne.
The real estate target will be filled by reducing the fund's domestic fixed-income allocation.
UFCW local goes overseas
The $200 million pension fund of United Food and Commercial Workers Local 655 hired Investment Advisers Inc. as its first international manager, running $15 million, said Donna Frame, administrative manager.
Funding came from reducing a $90 million balanced portfolio managed by Boatmen's Trust. Existing small-cap manager Dreyfus received $5 million more from the Boatmen's portfolio.
Merrill Lynch assisted.
Ministers add 2 for bonds
The $400 million pension fund of Assemblies of God Ministers Benefit Association hired two fixed-income managers, said Clyde Hawkins, administrator of treasury. Chicago Asset Management and Conseco Capital Management each will be assigned $10 million. Funding will come from cash flow.
Merrill Lynch assisted.
University hires for stocks
University of Colorado, Boulder, hired Barclays Global Investors and The Vanguard Group as the first equity managers for its $300 million operating fund, said Don Eldhart, associate treasurer.
Barclays was given $15 million for an S&P 500 index fund; Vanguard, $5 million for its International Growth Portfolio, managed by Schroder Capital Management. Vanguard's funding is expected to increase to $15 million in the next few years, while Barclays could be boosted to $45 or $50 million.
Funding will come from fixed income; no managers will be terminated. Callan assisted.
Wayne County taps CIGNA
The Wayne County, Mich., $132 million 401(a) defined contribution plan selected CIGNA Retirement & Investment Services as record keeper and The Consulting Group, a subsidiary of Smith Barney, to provide investment education. Trustees are screening investment options now, and eventually will offer eight to 12. Options will be selected later this year. The plan had been administered internally and offered six investment options from different mutual fund families.