Monitor Capital Advisors has always participated in P&I's index manager surveys, but through a miscommunication did not get into the survey results in your Feb. 22 issue.
For the record, as of last Dec. 31, Monitor Capital managed $2.2 billion in U.S. institutional tax-exempt assets. Of that, $1.68 billion was in domestic equity, $363 million was in domestic fixed income and $168 million was in international equity.
We offer these products through separate account management, pooled funds and tactical asset allocation strategies.
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Monitor Capital Advisors
Clinton's Social Security plan
True to his past political stances, President Clinton's proposal to reform Social Security melds both Democratic and Republican ideas. However, he is poised to take the Social Security program down a path that will forever change the promise first made in 1937 during Roosevelt's New Deal.
As an actuary whose practice focuses on retirement plan design, funding and administration and as a business owner, I have serious concerns with Mr. Clinton's proposal.
Mr. Clinton's proposal calls for investing up to 15% of the Social Security assets in private equities. Currently 100% of the assets are invested in Treasury bills and notes. He believes this would increase the return on assets, thus reducing the need for future contribution increases. He points out that private and public (city, state and federal) programs currently invest heavily in equities.
He doesn't address serious problems if this is adopted, including higher investment expenses, significantly higher than buying T-bills. Why do you think Wall Street is pushing to get their hands on about $1 trillion?
An "independent" board would be appointed to make investment decisions -- sounds suspiciously like "big" government. After making an investment, who would vote in corporate proxies? How would they vote?
President Clinton's proposal calls for creation of Universal Savings Accounts to provide an avenue to increase savings among the poor while allowing higher paid individuals to direct some of their Social Security taxes. What President Clinton forgets is that Social Security was created as "social insurance" -- giving more to lower paid people and less to higher paid people. It is a safety net providing a base level of income. It was specifically designed to not provide individual accounts with individual equity. It is a prime example of a government transfer. This is another reason why Social Security should not be confused with other private and public pension plans that invest in equities.
Also, don't forget that we as a nation also have an education problem. Do you really want to have workers who didn't graduate from high school making investment decisions? Is it a good use of our overall productivity to educate everyone about how best to assess risks and returns? Do you trust workers to take care of their individual accounts and not squander them? With Social Security, the benefits are paid over a retiree's and their spouse's lifetime -- not available in a lump sum. They can't go to a casino and lose it all at the roulette wheel. None of these extra burdens have been addressed.
Right now, Social Security retirement benefits cost 0.7% to administer, according to the Social Security Administration's 1998 Trustee Report. Guess what it would be under a combined model of individual accounts and basic plan? More. How much more?
Well, the average equity mutual fund has an expense ratio of 1.2%, according to Morningstar. That is probably a good starting point. On top of that, employers may have additional burdens placed on them for withholding taxes, splitting accounts and communicating with various investment firms.
Would employees spend time at home or at the office figuring out which investments to make? Would they research funds on the Internet at work?
Even with my concerns about President Clinton's proposal, I appreciate his desire to fix the long-term funding issue of Social Security.
His problem is that he is being influenced by Wall Street and others to radically change the program. It doesn't need that. He should use the pragmatic approaches of changing eligibility, benefit levels and taxes as utilized the last time major Social Security reform was passed. Don't ruin one of the few government programs that actually works.
Daniel P. Cassidy
Argus Consulting Ltd.
DSI International was not included on the list of enhanced index asset managers in the Feb. 22 special report on the leading index fund managers.
As of Dec. 31, DSI had $2.1 billion in our U.S. Controlled Residual Risk (enhanced index) program. This is an increase of $1.6 billion from our 1997 year-end total.
In addition, our U.S. program has produced annualized excess returns of 225 basis points over the S&P 500 index for the past three years.
Michael J. Galbreath
DSI International Management Inc.