SEATTLE -- The Boeing Co. is streamlining its defined benefit plan, which has ballooned to $38 billion with the addition of Rockwell International's and McDonnell Douglas' assets.
Most of the changes will occur in equities and real estate, but Gary Bland, vice president-trust investments, said he's reviewing the entire manager roster.
Boeing has 48 money managers, down from 63 before a consolidation push began 18 months ago.
Cutting the manager stable is necessary because the corporate treasury department operates on essentially the same budget and staff as it did before adding Rockwell's and McDonnell Douglas' pension assets, Mr. Bland said.
Among the changes:
* Boeing is cutting its equity allocation to 60% from 62%.
* Its real estate allocation -- currently 2% of assets -- likely will increase to between 4% and 5%. The fund could hire one or more real estate managers.
* Mr. Bland will be looking at domestic small-cap and value equities. That's because most of Boeing's active U.S. equity assets are in large-capitalization growth stocks.
* Indexed equity assets, now around 35% of U.S. equities, will range from 35% to 50%.
* Boeing could use more money managers with whom it has an "asset allocation/strategy relationship," Mr. Bland said. That involves giving money managers multiple assignments in multiple asset classes.
Minority and emerging managers, which the company sees as a valuable resource, may be part of the reorganization.
Boeing Chairman and Chief Executive Officer Phil Condit and Mr. Bland recently spoke at the Rev. Jesse Jackson's Rainbow Push LaSalle Street Project conference in Chicago about their commitment to diversity.
Boeing is committed to helping smaller firms without the experience in marketing to plan sponsors. The idea of being an important account to a smaller firm is an added bonus to Boeing pension executives.
Lack of the generally required five-year track record is not an issue for Mr. Bland. "What does what you did five years ago have to do with today?" he asked.
Two minority-owned money managers and a brokerage firm were recently hired, bringing the total of minority money managers to seven. Pugh Capital Management Inc., Seattle, and MDL Capital Management Inc., Pittsburgh, each was hired to run $200 million in broad-spectrum fixed-income portfolios.
At the same time, Boeing increased Philadelphia-based Tiffany Capital Advisors Inc.'s domestic equity growth portfolio by $95 million to a total of $300 million.
All three firms are owned by African Americans.
Eaten by baby ducks
New York-based Magna Securities Corp., also a minority-owned firm, was hired for commission recapture and to help lower transaction costs while the equity portfolio was reconstructed.
"It's like being nibbled to death by baby ducks," Mr. Bland said of transaction costs.
Boeing's current asset allocation is 53% U.S. equity; 9% international equity; 5% private equity; 29% domestic fixed income; 2% international bonds; and 2% real estate. The fund manages $1 billion to $1.5 billion in domestic bonds in-house.
Boeing's current domestic equity managers are: Alliance Capital LP; American Express Asset Management; Beekman Capital Management Ltd.; Cambiar Investors Inc.; Capital Guardian Trust Co.; Capital Management Associates Inc.; CIGNA Investments Inc.; Davis Skaggs Investment Management; Dimensional Fund Advisors Inc.; Fayez Sarofim & Co; Hathaway Associates; Hotchkis and Wiley; INVESCO; J.P. Morgan Investment Management Inc.; MacKay-Shields Financial; Mellon Capital Management; Oppenheimer Capital; Dresdner RCM Global Investors; Robert E. Torray & Co.; Bankers Trust Co.; Siphron Capital Management; SitInvestment Associates; Standish, Ayer & Wood Inc.; Tiffany Capital; and Waite & Associates.
Non-U.S. managers
Its non-U.S. equity managers are: American Express; Capital Guardian; Hotchkis and Wiley; Bankers Trust Co.; Commercial Union Investment Management Corp.; Putnam Investments Inc.; and Simms Capital Management Inc.
Boeing's U.S. bond managers are: Aetna Inc.; BlackRock Inc.; Boatmen's Capital Management Inc.; Capital Guardian Trust Co.; Chinook Capital Management; Goldman Sachs Asset Management; McKee Investment Management Co.; MDL; Miller Anderson & Sherrerd; Pacific Investment Management Co.; Pugh; Dresdner RCM Global Investors; Standish, Ayer & Wood; and Sirach Capital Management Inc.
Non-U.S. bond managers are: Capital International; Deutsche Bank Capital Management; Julius Baer Investment Management Inc.; and Payden & Rygel Investment Counsel.
The two real estate managers are Prudential Real Estate Investors and Allegis Realty Investors LLC; TCW Group manages convertibles.
The fund also has a number of limited partnerships that invest in private equity and real estate.
