A Labor Department task force is expected to recommend pension executives hire only consulting firms with no financial arrangements with brokerage firms. The recommendation, aimed at avoiding soft-dollar conflicts of interest, is one of several by the ERISA Advisory Council's working group on soft dollars.
The group approved the recommendations this month, but is not expected to release its report until early December. Sources said the report will neither condemn soft-dollar practices, nor ask for a repeal of the law that permits managers to pay higher than the prevailing commissions for securities trades in exchange for research services and products.
Witnesses testified before the working group that consultants with ties to brokerage firms could coerce money managers into trading securities through them in order to be included in manager searches. Others said commission recapture programs conducted by such consultants for pension plans could be construed as self-dealing under ERISA.
AT&T Corp., Berkeley Heights, N.J., plans to do a major asset-liability study sometime next summer, said S. Lawrence Prendergast, head of AT&T Investment Management Corp., which oversees $83 billion in retirement assets of AT&T and Lucent Technologies.
The study will be conducted after ATTIMCO's contract to manage Lucent's pension fund ends. Lucent has told AT&T it wants to assume management of the fund. Once that happens, assets overseen by ATTIMCO will shrink to $30 billion. ATTIMCO also may re-evaluate the fund's real estate portfolio.
California Public Employees' Retirement System, Sacramento, decided to retain Dimensional Fund Advisors as manager of a $1.2 billion U.S. passive small-cap equity portfolio. If fee negotiations aren't successful, the contract will be awarded to State Street Global. CalPERS has $124 billion in assets. Also in the running was ANB Investment.
Los Angeles County Employees ' Retirement Association, Pasadena, Calif., selected ICM Asset Management for a $150 million small-cap to midcap U.S. equity assignment. ICM had been managing a $20 million small-cap portfolio for the fund as part of a team of managers overseen by Northern Trust Global Advisors. The $22 billion fund made ICM a regular manager as a result of good performance. Funding will come from a Russell 2000 index portfolio with Bankers Trust.
The stock price for the IPO of Affiliated Managers Group was set at $23.50 per share, higher than the range of $20 to $23 per share that the company had predicted. Lead underwriter is Goldman Sachs. AMG is offering 7.5 million shares of common stock.
The median emerging markets manager in the universe of InterSec Research posted a -3.6% return in the third quarter, compared with a drop of 9.3% in the MSCI Emerging Markets Free index. The median manager outperformed in each of four regional categories: Asia, Europe, Latin America, and the Middle East and Africa. The best outperformance was in Asia, where the median manager posted an 18.7% decline, vs. -30.3% for MSCI's EMF Asia component.