The Central States Southeast & Southwest Areas Pension Fund has renewed talks with the Department of Labor seeking to appoint a second named fiduciary to oversee the $18.2 billion Teamsters pension fund.
The Department of Labor ought to support the proposal, which has to be approved by the U.S. District Court in Chicago, under the consent decree imposed on the fund.
At present, the Central States Teamsters fund uses one named fiduciary, Morgan Stanley & Co. Officials of the fund reason that a second named fiduciary would help diversify risk. A second named fiduciary could provide some protection for the fund in case of asset allocation misjudgments, could improve investment performance and sustain institutional stability in the event a named fiduciary had to be replaced suddenly. Also, it may lower costs by fostering more competition for the work.
The Central States ought to seek, too, to allow the named fiduciaries to manage some of the fund. At present the named fiduciary has the authority only to set asset allocation and hire and fire money managers.
Revising the consent decree to allow a second named fiduciary would open the fund to more diverse management without compromising the concern for financial abuse for which the court oversight was initially imposed in 1982.
It also likely would open up the bidding process. In 1992 when the trustees last rebid for named fiduciary, they asked 10 major firms to bid. Only Morgan Stanley and one other firm responded, the rest apparently figured Morgan Stanley had a lock on the contract.
William J. Nellis, secretary to the board of trustees and attorney for the fund, said the Central States won't ask for such investment authority as it did last year, when its request for a second named fiduciary languished because of lack of Labor Department support.
The fund now has more than triple the some $5 billion in assets it had when the single named fiduciary was imposed. The consent decree needs to adapt to circumstances and foster better oversight.