OREGON, WILSHIRE END 20-YEAR RELATIONSHIP
SALEM, Ore. - The Oregon Public Employes' Retirement System consolidated its consulting business with Frank Russell Co., Tacoma, Wash., ending a more than 20-year relationship with Wilshire Associates.
The $24 billion pension fund previously had used both Russell and Wilshire.
A spokesman for the retirement system cited Russell's "depth in researching and selecting money managers" as its reason for choosing the firm.
The system also broadened the role of Pension Consulting Associates to allow PCA to act as a "provocateur" and to offer second opinions. Also, consultant Woody Brock was retained for broad economic analysis.
San Diego fund invested with failed manager
SAN DIEGO - The $3.3 billion San Diego County Employees' Retirement Association was among the investors in a futures fund managed by Victor Niederhoffer, a futures and hedge fund manager that recently shut down because of investment losses.
Robert Snigaroff, investment officer for the San Diego fund, did not have the exact amount the San Diego fund lost through Mr. Niederhoffer, but said less than 5% of the fund's $140 million allocation was invested with the firm.
The fund invested with Mr. Niederhoffer through Hart-Bornhoft Group, a manager-of-futures managers for San Diego, he said.
TCW gets nod to give advice based on behavior
WASHINGTON - The Department of Labor has approved an exemption allowing TCW Group to provide specific investment advice to defined contribution plan participants for a fee. TCW would be the first money management firm allowed to provide such advice (Pensions & Investments, Sept. 1).
TCW's proposal would use outside financial and behavioral finance experts to provide investment recommendations based on participant responses to a detailed questionnaire. TCW plans to sponsor and manage a mix of mutual funds in four commingled trusts that would invest in TCW's Galileo family of 13 mutual funds.
Connecticut state fund terminates J.P. Morgan
HARTFORD, Conn. - The State of Connecticut Trust Funds terminated J.P. Morgan Investment Management Inc. as a manager of $150 million of Japanese equities, said a spokesman for the $15 billion pension fund.
J.P. Morgan's performance since inception on March 31, 1996, was -16.1%, compared with -13.6% for its benchmark, according to the spokesman.
The assets were transferred to DSI International, which also manages a Japanese equities mandate for the fund.
Connecticut continues to use J.P. Morgan as a manager of a $350 million domestic fixed-income portfolio and a $2 billion structured domestic equity portfolio, said the pension fund spokesman.
A J.P. Morgan spokesman said the firm uses a core investment style that is sector neutral, and Connecticut preferred a more aggressive style.
Nevada college system cuts Payden & Rygel
RENO, Nev. - University and Community College System of Nevada terminated Payden & Rygel as a short-term global fixed-income manager for its operating fund.
The termination was not performance related, but was made in a move to consolidate the managers of the $200 million endowment fund and the $150 million operating fund, said Tim Ortez, director of banking and investments. PIMCO will handle the $30 million portfolio, bringing its total to $125 million for both funds in its domestic and international fixed-income portfolios.
Cambridge Associates assisted.
PBGC settles with 2 pension funds
WASHINGTON - The PBGC has reached agreements with two companies concerning contributions to their pension plans.
The PBGC reached an agreement with K&F Industries Inc., New York, which requires the maker of aircraft components to contribute $4.5 million by year end to its pension plans, which are underfunded by nearly $25 million.
The PBGC also obtained access to a $4.5 million letter of credit from the company's lenders and a $40 million second security interest in company assets in case it has to make claims related to the plans.
The agreement will remain in effect for five years, and until K&F has achieved investment-grade ratings or completed two years without any underfunding.
Also, the PBGC reached an agreement with The Ladish Co., a Cudahy, Wis., maker of metal products, to improve funding of six underfunded plans covering 3,200 workers and retirees.
Ladish will contribute $17.7 million in cash to the plans and merge three of the underfunded plans with the two plans that are overfunded.
After the steps are completed, PBGC will lift liens it placed on Ladish assets in 1996. The plans now have assets of $54 million, and liabilities of $106 million.
D.C. board maintains return, pay assumptions
WASHINGTON - Trustees of the $4.5 billion District of Columbia Retirement Board have agreed to maintain its 7.25% actuarial rate of return and its 5% expected increase in salaries and inflation.
Milliman & Robertson, the fund's actuarial consultant, recommended the figures not change.
Jorge Morales, acting executive director, said the board could decide on a more aggressive rate of return once it has turned over the bulk of its assets and unfunded liability to the federal government in six to nine months.
Massachusetts PRIM trying to sell tobacco stocks
BOSTON - The Massachusetts Pension Reserves Investment Management Board is having detailed discussions with money managers about how the $22.1 billion fund can get out of tobacco stocks without disrupting performance.
Acting Gov. Paul Cellucci has signed legislation that requires PRIM to stop buying tobacco stock in 90 days and divest of all tobacco holdings within three years. PRIM Acting Executive Director Scott Henderson said the fund has about $230 million in tobacco investments.
A detailed study will have to be done on all investments to uncover tobacco revenue, and PRIM might consider developing a database to track the managers' holdings for compliance, he said. PRIM probably will move quickly to divest the holdings, not wait three years, he said.
Ohio fund readies short list for equity portfolio
COLUMBUS, Ohio - The Ohio Bureau of Workers Compensation is close to naming a short list of domestic equity managers that will compete for the fund's $7 billion equity portfolio.
If the oversight commission for the $17.5 billion fund approves candidates at its Nov. 12 meeting, interviews will be scheduled for the second week of December, said Bob Cowman, CIO. The fund will consider managers in six investment style areas: large-cap value, large-cap growth, midcap value, midcap growth, small-cap value and small-cap growth.
Callan Associates is assisting.
New York teachers' system posts 20% return
NEW YORK - The New York City Teachers' Retirement System generated a 20.4% total return for the fiscal year ended June 30, said Donna Anderson, chief investment officer for the $20.6 billion fund. The Trust Universe Comparison Service median public fund returned 20% for the one-same period, she said.
NYC Teachers' outperformed every benchmark within its various asset classes except for international fixed income, which returned 2% for the year ended June 30, compared with a 2.25% return for the Salomon Non-U.S. World Government Bond Index. International fixed income comprises less than 1% of the total assets of the fund.
NYCERS, firefighters' fund join Columbia/HCA suit
NEW YORK - Trustees of the $39.2 billion New York City Employees' Retirement System and the $5.2 billion New York City Fire Department Pension Fund voted to join the lawsuit against Columbia/HCA Healthcare Corp. brought by New York State Comptroller H. Carl McCall. NYCERS' owns 1.8 million shares of Columbia/HCA stock; the fire department fund owns a little more than 162,000 shares, said New York City Deputy Comptroller Jon Lukomnik.
Mr. McCall filed suit against Columbia/HCA this past summer seeking to prohibit any of the company's 11 board members from receiving payments from consulting or employment agreements, such as golden parachute distributions.
The suit also asks that improper gains from insider trading be impounded or restricted, and that Columbia be required to implement stiffer internal controls to ensure compliance with state and federal laws.
Morgan Stanley indexes drop in October
NEW YORK - The Morgan Stanley Capital International World Index dropped 5.4% in U.S. dollar terms in October, while the MSCI EAFE Index fell 7.8% and the MSCI Emerging Markets Free index plunged 16.5%.
Not surprisingly, Hong Kong's market - down 29.1% - was the month's worst performer among developed markets. Malaysia's market ranked second worst, with -21.1% return. Conversely, Switzerland's market, which declined 0.7%, was the developed markets' best performer last month.
Among emerging markets, the Thailand Free component of the MSCI EMF index ranked last with -34.1%.
Only two markets in the world managed gains last month: Turkey rose 5.7% while Morocco advanced 2.6%, MSCI's data show.
Canadian funds' median balanced returns are up
TORONTO - Canadian pension funds posted a median balanced return of 26.5% for the year ended Sept. 30, up from 15.1% a year earlier, according to SEI Financial Services Ltd.
For the year, active managers of Canadian equities had a median 41.1% return, up from 19.7% a year earlier; this 12-month period's return beat the Toronto Stock Exchange Index's 35.4% rise by 570 basis points.
The median active bond manager in Canada tied the 13.6% return of the Scotia Capital Markets Universe Bond Index for the 12 months, while the median showing by foreign equity managers came to 28.5%, vs. 26% for the Morgan Stanley Capital International World Index, SEI's data showed.
AEW II, Dolce enter hotel, resort deal
BOSTON - AEW Capital Partners II formed a partnership with Dolce International to acquire and develop conference center hotels and resorts in strategic locations across the United States and Europe.
AEW Capital Partners II, a partnership managed by AEW Capital Management, has committed $75 million to the venture and will hold a 90% stake. Dolce International is a hotel conference center management company.
To date, the venture has completed two acquisitions.
In a separate transaction, AEW Capital Partners II committed $25 million to Benchmark Assisted Living.
Benchmark will buy, develop and operate senior housing throughout New England. The company plans to invest $100 million in senior housing over the next five to seven years.
AEW will evaluate each Benchmark deal individually, said a spokesman.
Interest strong in domestic venture capital investing
NEW YORK - Investors put at least $3 billion into domestic venture capital investments during the third quarter, according to Coopers & Lybrand L.L.P.'s third quarter Money Tree Survey. The investments in 646 domestic companies belied expectations of a summer slowdown in venture capital-led investments.
Survey respondents put an additional $1.1 billion of private equity into 14 late-stage investments and buy-out deals, according to the survey. Another $757 million of venture capital money was invested overseas, according to Coopers & Lybrand.
The $3 billion venture capital investment is the second highest amount raised in a quarter, and ties a previous amount of capital invested. The second quarter's $3.2 billion invested is the record.
Year-to-date, venture capital investments total $8.6 billion. It is expected to reach $12 billion at year end, compared with $10.1 billion at the end of 1996.
REIT, real estate fund eye land for entertainment
INDIANAPOLIS - Simon DeBartolo Group and DLJ Real Estate Capital Partners entered into a joint venture to acquire and develop entertainment-oriented real estate in the United States and abroad.
Simon DeBartolo Group is the largest publicly traded real estate investment trust; DLJ Real Estate is a $700 million real estate opportunity fund sponsored by Donaldson, Lufkin & Jenrette.
The venture intends to accumulate more than $1 billion of real estate during the next two years.
IRRC, Reynolds form alliance
WASHINGTON - The Investor Responsibility Research Center and Russell Reynolds Associates, executive recruiters, have established a strategic partnership to produce reports on global governance practices.
Under the terms, the IRRC will provide research and data, and Russell Reynolds will provide financing and editorial insights.
Morgan Keegan acquires interest in Hester Capital
MEMPHIS, Tenn. - Morgan Keegan Inc. acquired ownership interest in Craig Hester Capital Management Corp., an asset management firm in Austin, Texas.
The firm will be renamed Hester Capital Management and will continue to be managed by Craig Hester, who will serve as president and chief executive. Hester Capital has about $375 million under management.
A Morgan Keegan spokeswoman said the firm is interested in expanding its ownership of regional asset management firms.
Northern Trust, Caisse team up on hedge funds
CHICAGO - Northern Trust Global Advisors and Caisse de Depot et Placement du Quebec have collaborated to fund four global macrohedge investment funds. Initial funding is $200 million.
Caisse is the initial investor in each of the funds, which will invest worldwide in equities, fixed-income, currencies, commodities and other asset classes.
Northern Trust has established a subsidiary in Montreal, NT Fund Advisors of Quebec Inc., to act as investment consultant to the funds.
Caisse also will be the investment manager of one of the funds. Other investment managers include Opportunity Asset Management of Rio de Janeiro, Omnia Asset Management of London and Regent Fund Management of Hong Kong.
Northern Trust Global has about $164 billion in assets under management and is a wholly owned subsidiary of Northern Trust Corp.
Survey says CEOs tolerant of independent boards
WASHINGTON - More than 1,000 CEOs of publicly traded companies are indicating broad acceptance of more active and independent boards, a new survey shows.
The survey by the National Association of Corporate Directors and Deloitte & Touche also shows most chief executives support wholly independent nominating, compensation and audit committees, and agree directors should fully disclose all professional commitments and limit the number of corporate boards on which they serve.
The survey was cited by Ira Millstein, partner with Weil, Gotshal & Manges, at the Investor Responsibility Research Center's conference in Washington last month.
Alliance will service smaller California plans
ENCINO, Calif. - CIGNA Retirement & Investment Services and Louis Kravitz & Associates formed an alliance to provide bundled defined benefit pension services to small and midsized pension plans in California. CIGNA will provide multimanager investment management services; LKA will provide actuarial and consulting services.
The alliance is designed to provide a total outsourcing program for employers with 200 to 5,000 employees.
New brokerage firm targets institutional investors
CHICAGO - A new brokerage firm, Loop Capital Markets L.L.C., intends to focus on institutional investors. It executes equity securities, provides equity research on Midwest, midcap stocks using a value approach, structures municipal securities and provides financial advisory services to municipalities.
The firm was founded by James Reynolds Jr., previously a director at the Chicago office of Merrill Lynch & Co., and Albert R. Grace Jr., previously a vice president at Northern Trust Co. and president and chief operating office of Selected Financial Services Inc., a Kemper Corp. subsidiary.
Mr. Reynolds will be responsible for all investment banking, trading and institutional sales activity. Mr. Grace is the firm's chief financial officer and managing director of equity sales and research. The firm clears and settles all transactions through Broadcort Capital Corp., a subsidiary of Merrill Lynch.
Fidelity Investments reorganizes divisions
BOSTON - Fidelity Investments has split product distribution into three separate channels.
Fidelity's retail and brokerage divisions will merge to form Fidelity Personal Investments and Brokerage Group, which will provide direct mutual fund sales and brokerage services to individuals. J. Gary Burkhead, vice chairman of FMR Corp., will head up the division.
Robert L. Reynolds will continue to head Fidelity Investments Institutional Retirement Group, which is the company's distribution channel to 401(k), 403(b) and 457 plan sponsors. Fidelity Financial Intermediary Services, headed by Kevin J. Kelly, will service the investment needs of banks, insurers and broker/dealers.
Futures industry group pushes plan for exchanges
CHICAGO - The Futures Industry Association, a futures broker group, submitted its own plan for a merging of the clearing operations of the Chicago Board of Trade, the Chicago Board Options Exchange and the Chicago Mercantile Exchange.
The FIA proposal focuses on governance of the proposed clearing entity and financial safeguards. FIA executives hope a joint committee looking at ways the Chicago exchanges could combine operations will use the proposal, according to a statement.
Yanni-Bilkey shows returns up slightly for 3rd quarter
PITTSBURGH - The median short-term, fixed-income return in the third quarter inched upward to 5.66% from 5.64% in the second quarter of this year, according to the Yanni-Bilkey Investment Consulting CA$H universe.
Average maturities shortened slightly to 59 days on Sept. 30 from 64 days at the end of June, reflecting mild uncertainty on the future direction of interest rates.
The Yanni-Bilkey CA$H universe consists of 110 short-term institutional portfolios with total assets of about $180 billion.
State Street buys majority of investment manager
BOSTON - State Street Global Advisors is acquiring a majority interest in Advanced Investment Technology, a Clearwater, Fla.-based investment management firm. Financial details of the deal were not announced. AIT develops investment strategies based on artificial intelligence techniques. Ownership of AIT will be divided among SSgA, AIT principals and current AIT shareholder Investment Technology Group Inc. AIT will remain in Clearwater.
In addition, SSgA has created the SSgA Research Lab, which will pool the investment expertise and research from all entities of the organization and focus on technology-driven quantitative investment techniques to support all of SSgA's product groups. The unit will have headquarters in Boston and be led by Dean Barr, chief executive officer of AIT.
Meridian unveils institutional portfolios
ENGLEWOOD, Colo. - Meridian Investment Management introduced two institutional portfolios. One is a domestic core equity portfolio that offers exposure to 11 economic sectors and rotates among 115 industries as defined by the S&P SuperComposite 1500. The investment strategy is bottom-up and value-oriented.
The international equity strategy invests in 31 country indexes. The active country rotation strategy, coupled with passive stock selection is also bottom-up and value-oriented.
The minimum investment in both portfolios is $5 million.
Investor, REIT to invest in ailing shopping centers
PARSIPPANY, N.J. - Prudential Real Estate Investors and Developers Diversified Realty Corp., a public REIT, formed the Retail Value Investment Program, which will invest in shopping centers that need repositioning. The venture will be funded with $210 million from PREI's pension fund investors; DDR has made a $70 million commitment.
The venture was put together by Chadwick, Saylor, a real estate investment bank that specializes in transactions between tax-exempt investors and public private real estate companies.
Becker Capital offers midcap value strategy
PORTLAND, Ore. - Becker Capital Management is offering a midcap value portfolio strategy to plan sponsors. The portfolio, a first for the firm, comes after the closing Aug. 1 of the its small-cap value portfolio at $600 million. The run-up in the market and a recent hiring by the Oregon Public Employes' Retirement System forced the money manager to consider closing the portfolio.
The firm requires a $5 million minimum investment for the midcap strategy and manages $25 million in the new portfolio for two clients, which a source would not name. Becker has $2.6 billion under management.