Institutional investors will increase investment in risk management in 1998, and have increased their use of risk-adjusted returns, according to a survey conducted by Capital Market Risk Advisors Inc.
Close to 75% of survey respondents plan to increase investment in people, systems and education, results show. More than 40% use risk-adjusted returns, compared with 6% a year earlier.
Results also indicate investors need to focus more on the risks taken on through financial modeling.
The survey of investors, consultants and custodians was designed to evaluate progress regarding implementation of risk standards created by the Risk Standards Working Group in 1996.
The AFL-CIO called on the SEC, New York Stock Exchange and institutional investors to require complete independence between CEOs and members of boards' compensation committees, who determine their compensation. At the same time, the powerful labor union released a report profiling CEOs at 10 companies who have relationships with members of their boards' compensation committees.
Among those singled out: John Krol, DuPont; Terry Murray, Fleet Financial; and Stephen Hilbert, Conseco. The AFL-CIO also unveiled additions to its Web site, Paywatch, which details conflicts between board members and CEOs at more than 200 S&P 500 companies.
Vermont Teachers' Retirement System, Montpelier, with approximately $900 million in assets, will review a draft of a new investment policy by Callan Associates at its June 4 board meeting.
The investment policy ``may not change substantively,'' said James H. Douglas, state treasurer.
At the end of 1997, the system had 33% in global equity, 26% in domestic equity, 7% in international equity, 11% in domestic fixed income, 15% in global fixed income, 7% in real estate and 1% in alternative investments and cash. The system uses Fidelity as a large-cap domestic equity manager and J&W Seligman as a domestic small-cap manager. Delaware Investment Advisers runs global equity and fixed-income portfolios. Scudder, Stevens & Clark manages international equity, and Loomis Sayles is a domestic fixed-income manager.
Ventura County Employee Retirement Association, Ventura, Calif., will search for a small-cap value equity manager and an enhanced core domestic equity manager. Consultant Asset Strategy will compile a short list for the $1.9 billion fund, with a final decision expected by July 1.
The searches are a result of an asset allocation study that called for a 10% allocation to an enhanced core equity portfolio and a 3% allocation to small-cap value. Also as a result of the study, the fund is terminating large-cap value manager Palley-Needelman, which manages 7.5% of the total fund. Chet Needelman, chief executive officer, said the fund simply was reallocating assets away from value equity.
The Belgian Pension Fund for Doctors, Dentists and Pharmacists has become the first in Belgium to decide to vote at the shareholders' meetings of selected companies in Belgium, announced Deminor, a minority shareholder consultancy in Brussels. This is the first year institutional investors will vote at shareholder meetings in the country. According to Deminor, it had not been obvious that shareholders could legally vote. But a combination of a new interpretation of the law, along with pressure from corporate governance groups, has made it possible.
In a prepared statement, Karel Stroobants, deputy manager of the 15 billion Belgian francs (U.S. $395 million) fund, said the professional management of an equity stake requires the voting rights attached to it be actively exercised. This philosophy is in line with the fund's long-term investment policy and with its intention to fully exercise its fiduciary duty toward its members, he said.
Consolidated Papers Inc., Wisconsin Rapids, Wis., may move some money to active management from indexing and add a manager for its $600 million defined benefit plan, said John D. Steinberg, treasurer. It could make a decision in a couple of months, and is considering alternative equities, including hedge funds.
The fund has 20% in an S&P 500 index fund managed by State Street Global Advisors. The pension committee hasn't decided how much to move from that fund to active management. A State Street consulting group is assisting.