WHITE PLAINS, N.Y. -- Nine West Group Inc. completely restructured its $55 million defined benefit plan, moving for the first time into indexing, small-cap equities and emerging market investments, said Thimio Sotos, assistant treasurer.
Plan assets are now invested 75% in equities -- 55% domestic, 15% broad international, 5% emerging markets -- and 25% in domestic fixed income.
Mr. Sotos said in an interview that when Nine West acquired the Footwear Group of U.S. Shoe in mid-1995, it also acquired $50 million in pension assets.
Multiple defined benefit plans were combined while Nine West hired investment management consultant RogersCasey, Darien, Conn., to help set up a retirement committee and develop an investment policy.
The original Nine West pension fund had a basic allocation of 60% stocks, 40% bonds, managed by five investment firms. Mr. Sotos declined to name the managers, but said none was retained. The equity allocation "had some exposure to international and large-cap investments," he said.
The U.S. Shoe pension funds temporarily were invested in government bonds after the portfolios were transferred to Nine West.
After the seven-member retirement committee organized, it decided on a new asset allocation, and criteria for choosing its money managers. RogersCasey recommended 25 managers to run various asset classes the committee had selected. Nine West hired six for equities and one for fixed income.
"We were looking for managers whose firms were strong performers that consistently beat their benchmark and where turnover in personnel was low. The firms we considered were all cream of the crop, who shared a well-defined investment philosophy, strong analytical research, (and) whose fees were competitive," Mr. Sotos said.
The new asset classes and managers are as follows.
* Enhanced large-capitalization domestic equity indexing: J.P. Morgan Investment Management Inc., New York, and Barclays Global Investors, San Francisco, will manage $11.2 million apiece. The portfolios are benchmarked to the Standard & Poor's 500 stock index.
* Small-cap domestic equity: Alliance Capital Management, New York, is running $3.8 million in a small-cap growth portfolio and Reich & Tang Asset Management LP, New York, is running the same amount in a small-cap value portfolio. Both will be benchmarked against the Russell 2000.
* International equity: Morgan Stanley Asset Management Inc., New York, is managing $8.2 million in EAFE markets and Capital Guardian Trust Co., Los Angeles, is running $2.7 million in an emerging markets portfolio. The MSAM portfolio will be measured against the Morgan Stanley Capital International Europe Australasia Far East index, and the Capital Guardian portfolio against the MSCI Emerging Markets index.
* Domestic fixed-income: Pacific Investment Management Co., Newport Beach, Calif., is managing all $13.7 million of the fixed-income allocation in a core domestic fixed-income strategy, benchmarked to the Lehman Brothers Aggregate Bond index.
As part of the overhaul, Nine West also hired the Bank of New York as trustee, replacing Smith Barney Salomon.
"All our funds are commingled -- we're leveraging the talent of our managers," Mr. Sotos said. The retirement committee decided to use passive styles for the large-cap domestic portfolios because so few managers have beat the index in recent years. "We didn't think we could get returns from active large-cap managers that would justify the high fees they charge."