Nature abhors a vacuum, and seeks to fill it.
Hence the column in the last issue reporting on a study by Stephen J. Church. The study attempted to estimate, using publicly available data, the investment performance of 30 of the largest corporate pension funds.
The vacuum Mr. Church's study, and the column reporting on it, tried to fill was information about the performance of those large corporate pension funds - the megacorporate funds. The funds in Mr. Church's study had assets of $444 billion as of Dec. 31.
Not surprisingly, there is great curiosity about the performance of those pension funds. I get many telephone calls asking for such performance figures.
The answer I have to give is that performance figures for individual large corporate pension funds are not publicly available.
So we reported the figures Mr. Church calculated without checking with the funds involved that the figures were at least close, and without checking the conclusions and methodology of the study with other sources. One fund was called and declined to comment. Many more should have been called.
K.P.A. Advisory Services Ltd., a Toronto-based consulting firm that conducts a cost effectiveness survey of large pension funds using actually performance figures, also could have provided perspective.
Tom Scheibelhut, a partner at K.P.A. and managing director of Cost Effectiveness Management Inc., for example, said last week Mr. Church's results did not match the cost effectiveness findings, although the K.P.A. study has data only for the past four or five years.
The K.P.A. data for those years, however, shows large U.S. corporate funds generating positive value added over their stated policy allocations. "Large U.S. pension funds have done well," Mr. Scheibelhut said.
Mr. Scheibelhut questioned the use of Mr. Church's chosen benchmark: 60%Standard & Poor's 500 Stock Index and 40%Lehman Brothers Government Corporate bond index. He noted many large corporate pension funds have significant international, real estate and private equity allocations.
John Carroll, president of GTE Investment Management Corp., Stamford, Conn., raised a number of objections to the study and the column, not the least of which was that the study understated GTE's pension fund performance by more than 100 basis points a year.
Mr. Carroll also said time-weighted investment returns cannot be accurately computed without cash flow data.
Executives of about 20 funds have contacted the Committee for the Investment of Employee Benefit Assets at the Financial Executives Institute voicing similar concerns, said Gina Mitchell, director of government relations. Virtually all reported the figures in the column understated their funds' performance.
Mr. Church, however, stands by his methodology and his performance numbers. "I would be happy to take a look at their numbers and compare them with mine," he said. "My numbers are after fees. Theirs are probably before fees." He said he would be happy to meet with pension executives and discuss his methodology.
Nevertheless, the column needed more work and more perspective. As the senior editor, I should have seen what was missing.
However, it raises the issue of pension fund performance reporting. Corporate pension funds have huge assets, giving rise to a natural curiosity about whether these assets are being managed well. But corporate fund performance is hidden from the outside world by a thick wall of secrecy, although many funds share it among themselves.
Granted, reporting performance would lead to performance comparisons, and that is fraught with complications.
But while the secrecy exists, there will be curiosity, and perhaps even suspicion that the funds in general are not being efficiently run, and continued attempts to pierce the wall.