NEW YORK -- Watch out, General Motors.
For the first time since the breakup of AT&T in the early '80s, GM will face competition for the title of largest U.S. corporate pension fund.
The competitor? The combined employee benefit assets of GTE Corp. and Bell Atlantic Corp. The irony? Two-thirds of that asset total comes from Bell operating companies that had been part of AT&T.
The companies' merger is expected to be complete within a year -- pending shareholder and regulatory approval -- and a merger of their combined $79 billion in defined benefit and defined contribution assets is likely within two years, said Britt Harris, president of GTE Investment Management Corp. That Stamford, Conn.-based firm oversees GTE's $24 billion in retirement assets.
Bell Atlantic will bring $55 billion to the pension marriage -- including more than $36 billion in defined benefit assets and $12 billion in defined contribution assets resulting from an earlier merger of Bell Atlantic and NYNEX Corp.
General Motors Corp., meanwhile, had $90.6 billion in employee benefit assets as of Sept. 30, 1997.
Observers believe the GTE investment staff will dominate when the pension merger is complete.
"I think it would be hard to decide not to allow them to carry the baton," a source familiar with the GTE money management division said. He cited GTE's expertise and reputation for leadership in the pension world.
But for Bell Atlantic pension executives, this will be the second big merger they've lived through.
NYNEX's defined benefit assets were combined with Bell Atlantic's Jan. 1. Defined contribution assets were set to be fully integrated last month.
That merger wasn't without its casualties, however. Candace Cox, president and chief investment officer of the company's investment arm, Bell Atlantic Management Co., was terminated. She was replaced by William F. Heitman, who did not return phone calls for this story.
GTE has $17.5 billion in defined benefit assets and $6.5 billion in defined contribution assets.
An examination of the defined benefit asset mixes of GTE and Bell Atlantic/NYNEX before their merger shows more similarities than differences.
GTE had the highest equity exposure as of Sept. 30, 1997 -- 67% -- while NYNEX had 64% in stocks and Bell Atlantic, 61%. Private equity allocations ranged from a low of 2% at Bell Atlantic to a high of 8% at NYNEX. Real estate equity was lowest at GTE (2%) and highest at NYNEX (6%). Fixed income ranged from 19% at Bell Atlantic to 23% at GTE.
But asset allocation will be last on the to-do list for company officials, according to Scott Faris, consultant at Arnerich & Massena, Portland, Ore. Usually discussions on benefit formulas, demographics and liabilities come first.
GTE has about 20% of its defined benefit assets managed internally; Bell Atlantic was expected to have 15% to 20% of its assets managed internally after the NYNEX merger.
When the GTE and Bell Atlantic plans are merged, Mr. Harris said, there probably will be a "significant"' internal portfolio.
Both companies have large internal money management staffs: GTE has about 30 people and Bell Atlantic/NYNEX, 20.
Personnel and organizational issues have yet to be addressed, GTE's Mr. Harris said.
GTE's defined benefit plan uses roughly 25 external money managers to invest in public markets and uses even more for private markets such as venture capital and private equity.
It is not known how many managers are shared by the GTE and Bell Atlantic pension funds.
Among those believed to be working for both are: Grantham, Mayo, Van Otterloo & Co. LLC; Pacific Investment Management Co.; Morgan Stanley Asset Management/Miller Anderson & Sherrerd LLP; and J.P. Morgan Asset Management.