SUMMIT, N.J. -- R.J. Reynolds Tobacco Holdings Inc. and Nabisco Foods Inc. plan to cut money managers working for their pension funds as part of an overall review that includes an asset liability study and asset allocation study.
Watson Wyatt Worldwide, actuary for both pension plans, has just completed the asset liability study; the asset allocation study will be completed shortly.
After RJR Nabisco Holdings Corp. split up in April, its tobacco business inherited $2.31 billion of the $3.6 billion defined benefit pension plan; its food business received $1.29 billion. The two pension funds were funded on June 30.
Both pension plans cloned the former parent's asset allocation and received a proportionate share of each money manager's portfolio.
The two companies also decided not to hire in-house pension executives; instead the plans are being administered from the outside by Ed G. Robertiello, previously senior director of pension and benefit investments at RJR Nabisco.
He is assigned the duties of an in-house pension executive such as overseeing money managers and reviewing the asset allocation, through his own firm, Summit Fiduciary Services, Summit, N.J.
"R.J. Reynolds Tobacco Holdings initiated a liability and asset allocation study after the spinoff from our former parent . . . to ensure that our pension fund assets are appropriately allocated. We consider this to be a prudent and responsible course of action following a transaction of that nature," said Lynn L. Lane, senior vice president and treasurer, in a statement. "We'll consider the results in making any asset allocations we deem appropriate in future."
Nabisco executives could not be reached for comment.
Pension plans of both Reynolds, Winston-Salem, N.C., and Nabisco, Parsippany, N.J., have asset allocations of 45% domestic equities, 20% international stocks, 15% investment-grade bonds, 10% high-yield bonds and 10% alternative investments.
"The two plans are not that dissimilar," said a source who asked not to be identified, noting that members of both companies' investment committees were on the investment committee of the former conglomerate, and are comfortable with the investment allocation.
While a large plan can afford a long string of money managers, keeping costs under control is an imperative for the two smaller plans.
As a result, the two pension funds will aim to consolidate their manager lineups -- with an eye on underperforming managers -- while maintaining their investment objectives and strategies, the source said.
Domestic equity managers are: Acadian Asset Management Inc.; Alliance Capital Management LP; Continental Assurance Co.; Grantham, Mayo, Van Otterloo & Co. LLC; INTECH; Jennison Associates LLC; Prudential Insurance Co. of America; Rosenberg Institutional Equity Management; Arnhold & S. Bleichroeder Inc.; Sanford C. Bernstein & Co. Inc.; and Sturdivant & Co. Inc.
The two pension funds also use AEW Capital Management and Lend Lease Real Estate Investments as real estate managers.
Bond managers are: BEA Associates; W.R. Huff Associates Management Co.; Lincoln Capital Management Co.; J.P. Morgan Investment Management Inc.; Metropolitan West Asset Management; Oaktree Capital Management LLC; Pacific Investment Management Co.; Standish, Ayer & Wood Inc.; Utendahl Capital Management; and Western Asset.
Capital Guardian Trust Co.; Global Asset Management; Grantham Mayo; Jennison Associates LLC; and Sturdivant are international stock managers.
The Atlantic is emerging-markets bond manager for the two plans.
Chase Manhattan Bank is master trustee and global custodian for both plans.
RJR had converted its traditional pension plan into a hybrid, pension equity plan in 1994, and both the tobacco and food companies have retained that design.
The two new companies also received proportionate shares of the assets of RJR Nabisco's 401(k) plan. Reynolds received $1.2 billion; Nabisco received $1 billion.
Changes aren't expected in that area.
Both funds have retained Wachovia Asset Management as custodian.
PricewaterhouseCoopers Kwasha HR Solutions as record keeper.
Vanguard Group manages the bulk of the eight investment options.