RJR Nabisco Holdings is splitting its pension plan in two as part of its tobacco business spinoff next month. And, under an accord with the PBGC, the company agreed to make more than $400 million in contributions to reduce the underfunding of the tobacco business' new pension plan.
The PBGC estimates the R.J. Reynolds Tobacco Co. plan will be underfunded by nearly $500 million. Under the agreement, the company will pump in $290 million in cash -- $58 million at the time of the spinoff -- over the next four years, and contribute more to cover additional future accrued liabilities. The company also will give the PBGC a $116 million letter of credit. The agreement will be in effect for at least five years.
Rules due on 'pay to play'
SEC commissioners soon are expected to vote behind closed doors to approve a "pay to play" proposal. The measure will curtail investment advisers' ability to make campaign contributions to elected officials who are also public pension fund trustees, if they manage money for those funds.
Connecticut cuts 2
The $18.5 billion State of Connecticut Retirement & Trust Funds terminated emerging markets bond managers Grantham, Mayo, Van Otterloo and Lazard Asset Management, said Howard Rifkin, deputy treasurer.
Grantham was managing $73 million; Lazard, $108 million.
The assets will be temporarily reallocated to other bond managers while the fund conducts an asset allocation study.
Maryland's Casey joins PRIM
Carol Casey resigned as CIO for the Maryland State Retirement Systems to become CIO of the $25.5 billion Massachusetts PRIM Board July 1. An interim CIO has not yet been appointed at the $29 billion Maryland system, said State Treasurer Richard Dixon.
Ms. Casey replaces Collette Chilton, who left PRIM more than a year ago to become CIO for Lucent Technologies. Ms. Casey will receive $140,000 at PRIM; at Maryland, the salary is $85,000.
Alameda considers hire
Officials at the $3.4 billion Alameda County (Calif.) Employees Retirement Association will consider May 19 whether to hire Pacific Financial Research to manage $55 million in a large-cap value strategy, said Linda Brewton, investment officer. Funding will come from rebalancing. Trustees also will decide whether to issue an RFP for the fund's first enhanced index manager.
EEOC studies cash balance
The Equal Employment Opportunity Commission is examining conversions of traditional defined benefit pension plans to cash balance plans for possible violations of the Age Discrimination in Employment Act. Dianna Johnston, assistant legal counsel, said the study is preliminary, but could lead to a full investigation.
Dutch funds win NIB
After raising their joint bid twice, Pensioenfonds ABP and PGGM have won their fight to acquire De Nationale Investeringsbank. The Dutch funds raised their initial bid of 66 guilders per share ($31.94) to 70 guilders and then again to 72.50 guilders as key minority shareholders held out for a higher offer. Holdouts ING Groep, with 20% of NIB's stock; Fortis, with a 5% stake; and ASR, with 7%, ultimately agreed to tender their shares.
Bond search nears
The $1.1 billion Alabama Trust Fund is expected to issue an RFP for a domestic fixed-income manager after its June 14 board meeting, said Porter Bannister, assistant finance director. Ten semifinalists from a previous search will be included, said Lucy Baxley, state treasurer. The previous search was scrapped after the election of a new governor, who then appointed a new finance director.
Currently, Wellington Management runs the entire $1.1 billion in domestic fixed income. Wellington is expected to remain a manager for the fund after the search is completed.
Stagecoach taps Pictet
The L250 million ($405 million) Stagecoach Holdings pension fund hired Pictet Asset Management U.K. to manage a European equities (ex-U.K.) portfolio. The portfolio initially will amount to 4% of assets, funded from cash. The fund wants to increase its exposure to continental European equities. U.K. stocks now are about 70% of plan assets, said Derek Scott, chairman of the board of trustees.
HSBC Gibbs assisted.
Darien taps Harbor
The City of Darien, Conn., hired Harbor Capital Management to replace Wright Investors' Service as sole external manager for its $26 million Police Pension Fund and $26 million Fire Pension Fund, said Ted Covert, board chairman. Harbor will manage $11.4 million in domestic equity and $7.8 million in domestic bonds for the fire fund; and $11.7 million in U.S. equity and $7 million in domestic bonds for the police fund.
Higgins Associates assisted.
CalPERS 457 adds option
CalPERS is adding to its 457 deferred compensation program a passively managed small-cap index fund pegged to the Russell 2000 index.
The new option, like the seven others available for the $156.4 billion fund, will be managed by State Street Global Advisors, said spokesman Mark DeSio.
The system also terminated Oppenheimer, which had managed the plan's actively managed large-cap fund, to keep all of the business with one investment group and to get better pricing, he said.
New York shifts investment
As a result, Fuller & Thaler's allocation was increased by $20 million, Brown Capital Management by $16 million and New Amsterdam Partners by $4 million. The fund also reduced Paradigm's account by $20 million, Valenzuela's by $13 million and Fortaleza's by $7 million. The portfolio was rebalanced to maintain a balance between midcap and small-cap investments.
In addition, the fund committed $50 million to two South African private equity funds: $25 million to South African Private Equity Fund II, sponsored by Brait Capital; and $25 million to Ethos Capital Fund IV.
Decision near on custodian
The New Mexico State Board of Finance is considering Mellon Trust, Citibank and incumbent Bankers Trust in the search for a custodian for the state's four main pension and endowment funds.
A decision may come in late June.