BOSTON -- State Street Bank and Trust Co. will purchase Wachovia Bank's institutional trust and custody businesses.
Terms of the agreement were not disclosed.
Wachovia will sell its master trust and institutional custody businesses, representing 270 client relationships with about $61 billion in assets.
This will significantly increase State Street's share of accounts with less than $500 million in assets.
A representative from State Street Bank said the bank plans to open an office in Winston-Salem, N.C., and will offer positions to 43 Wachovia staff members.
Managers up for review at Alliant TechSystems
HOPKINS, Minn. -- Alliant TechSystems Inc. will begin a manager review after completing an asset allocation study for the $1 billion defined benefit plan, said John Lotzer, director of investments.
The new asset mix is 47% U.S. equities, 23% international equities and 30% domestic fixed income. The previous mix was 45% U.S. equities 25% international equities and 30% domestic fixed income.
Frank Russell did the study.
Changes in the air at Montana Power
BUTTE, Mont. -- The Montana Power Co. is considering investment changes as a result of a recently completed asset allocation study for its $283 million defined benefit plan, said Treasurer Ellen Senechal, who declined to say what specific changes are being considered. A decision is expected by October.
Separately, Brandywine Asset Management was hired to replace Firstar Investment Research & Management as manager of a $28 million small-cap value U.S. equity portfolio, Ms. Senechal said. Mercer assisted.
University scrutinizes endowment and pension funds
PHILADELPHIA -- The University of Pennsylvania is conducting asset allocation studies for both its $3 billion endowment and $500 million university employee pension fund, said Landis Zimmerman, chief investment officer.
Both funds are going to be using Wharton business school professors and consultant Cambridge Associates to complete the studies, he said.
Alabama fund looks at international approach
MONTGOMERY, Ala. -- The Retirement Systems of Alabama's in-house bond team may invest in international corporate bonds for the first time, said Allen Webb, a fixed-income analyst for the fund.
The $24.8 billion system has almost $10 billion in fixed-income assets, with $187 million invested internationally in government securities.
"It's a natural progression to move from government paper to high-yield, corporate paper," Mr. Webb said.
Alabama now uses a customized version of the Salomon World Government Bond index, which would be further customized to include international corporate bonds if the change is made, he said.
The new program would begin after September, when the fund's fiscal year ends.
Warren Employees OKs new asset mix
WARREN, Mich. -- The Warren Employees' Retirement Commission approved a new asset mix following an asset allocation study, said Christine Cassani, board chairwoman.
The $140 million defined benefit plan's new mix is 50% domestic equities, 10%international equities and 40% domestic fixed income. The previous mix was 60% domestic equities and 40% domestic fixed income.
The plan is considering a search for its first international equity and small-cap U.S. equity managers. A decision is expected by November.
Ideal contemplating asset allocation study
SYCAMORE, Ill. -- Ideal Industries Inc. is considering an asset allocation study for its $40 million defined benefit plan, said Wendy Jablow, vice president of human resources. The current mix was not available. According to the 1999 Nelson's Directory of Plan Sponsors, the mix is 56% domestic equities, 39% domestic bonds and 5% cash. A decision is expected by October.
L.A. employees terminate and reallocate
LOS ANGELES -- The Los Angeles City Employees' Retirement System board voted to terminate Paradigm Asset Management, which ran a $21.2 million large-cap active value fund for the $7 billion system.
Instead, the board decided to divert the money into an existing large-cap value index fund that is managed by Barclays Global Investors, increasing the assets in that fund to $450 million from $161 million.
The board also voted to invest $15 million in Richland Ventures III, a venture capital fund.
Illinois governor approves tax-deferred college plan
SPRINGFIELD, Ill. -- Gov. George Ryan signed a bill Aug. 18 approving a tax-deferred college savings program to begin March 1.
An official investment policy has yet to be written, said Martin Woven, inspector general at the state treasurer's office.
The 529 plan is expected to be processed through local financial institutions, Mr. Woven said. The money will be invested through Illinois banks.
Investments will be based on beneficiaries' ages.
County to study assets following manager review
MEMPHIS, Tenn. -- The Shelby County Retirement System will begin an asset allocation study in October, said David Pontius, manager of investments for the $687 million fund. The current mix is 60% domestic equities and 40% domestic bonds.
Consulting Services Group is expected to complete the study by November.
County fund conducts asset allocation study
ANN ARBOR, Mich. -- The Washtenaw County Employees' Retirement System is conducting an asset allocation study on its $185 million defined benefit plan to see what changes, if any, are needed, said Monica Lawrence, retirement administrator.
The current asset mix is 60% domestic equities and 40% domestic bonds. The study, to be conducted by Capital Resource Advisors, is expected to be completed by October.
Braintree sets first task for new consultant
BRAINTREE, Mass. -- The $82 million Braintree Contributory Retirement System expects to have its new consultant, New England Pension Consultants, conduct an asset allocation study as its first task. The study probably will begin at the end of the month, said Phyllis DiPalma, executive director. The fund has approximately 45% in equities, 40% in bonds and the remainder in real estate and cash, Ms. DiPalma said.
State system extends contracts because of Y2K
PROVIDENCE, R.I. -- The Employees' Retirement System of Rhode Island is extending past Jan. 1 the contracts of custodian State Street Bank and Pacific Corporate Group, an alternative investment adviser. Although the contracts of the firms already have expired, trustees of the $6.5 billion fund will review the firms post-Y2K, said a spokesman for Treasurer Paul Tavares.
Mr. Tavares and other trustees of the $6.5 billion fund also approved the policy of waiting to conduct manager searches until after Jan. 1.
Money manager changes would be made this year only if an investment firm were found not to be Y2K compliant by the Sept. 30 deadline. Managers seem to be prepared so far, the spokesman added.
Louisiana teachers file class-action suit
BATON ROUGE, La. -- The Louisiana School Employees' Retirement System has filed a class-action lawsuit against Motorcar Parts & Accessories Inc., Torrance, Calif., and certain officers and directors of the company.
The suit alleges that Motorcar and some of its officers and directors issued "materially false and misleading statements to the investing public" concerning the company's financial results, which inflated Motorcar's stock price, according to Bernstein Litowitz Berger & Grossman, counsel for the retirement system.
On Aug. 2, Motorcar said it would restate its previously reported financial results for the fiscal years ended March 31, 1997 and 1998, and for the nine-month period that ended Dec. 31 because of accounting irregularities pertaining to the timing of product returns. Following the announcement, trading of Motorcar shares was halted.
The executives named in the suit are: Mel Marks, chairman of the board and chief executive officer; Richard Marks, chief operating officer and member of the board; and Peter Bromberg, chief financial officer.
The $1.4 billion fund intends to file to become the lead plaintiff in the case.
The suit is open to all who bought the stock between May 22, 1997, and July 30, 1999.
New York employees provide permanent mortgages
NEW YORK -- The $41 billion New York City Employees Retirement System will provide permanent mortgages of $546,714 and $565,000 to two local child care centers to help them finance improvements at their facilities, said Alan G. Hevesi, New York City comptroller.
The loans are part of an economically targeted investment program through which the city's five pension funds spur economic development through affordable loans to community organizations.
Fleet settles SEC charges against Shawmut
WASHINGTON -- Fleet Investment Advisors is settling charges brought by the Securities and Exchange Commission that several top officers of Shawmut Investment Advisers defrauded clients of $1.8 million in brokerage commissions paid to brokers for new client referrals, including a $600 million International Brotherhood of Teamsters Local Union 710 pension fund account.
Fleet acquired Shawmut in December 1995 and is legally responsible for Shawmut's actions.
On its SEC periodic disclosure form, Shawmut claimed it had used the commissions to pay for investment research. Federal securities laws prohibit money managers from undisclosed use of client assets to benefit themselves. The securities watchdog found Shawmut had breached its fiduciary duty to its clients by failing to disclose its use of client brokerage commissions to obtain referrals, and that Shawmut had breached its fiduciary duty to seek best execution for its clients' securities transactions.
Without admitting guilt, Fleet agreed to settle the charges and pay more than $1.9 million to clients whose accounts were used to pay brokers for client referrals.
Legg-Mason to acquire Berkshire Asset Management
BALTIMORE -- Legg-Mason acquired Berkshire Asset Management from its two principals, Michael H. Cook, president and chief executive, and Kenneth J. Krogulski, executive vice president and chief investment officer. The cash deal closed Sept. 2; terms were not disclosed.
The firm will continue to operate independently, managed by Messrs. Cook and Krogulski, who signed long-term employment agreements. Berkshire manages about $600 million, of which about 20% is managed for institutional investors and the remainder for high-net-worth individuals.
CalPERS provides two letters of credit
SACRAMENTO, Calif. -- The California State Teachers' Retirement System is providing letters of credit in support of two loans for projects in California. One is backing an $11.7 million loan to Beckett Hall, a non-profit public benefit corporation, to finance and construct a 181-unit student housing development on the campus of the University of California, Davis.
The $101 billion system also is providing a $5 million confirming letter of credit in support of a loan to Starter and Alternator Exchange. The proceeds will be used to acquire real property and an existing 108,000-square-foot manufacturing facility in Pacoima, Calif. An estimated 180 jobs will be created by the expansion of the company, which remanufactures auto parts for foreign and domestic vehicles.
Fund watches one manager, considers adding another
TUCSON, Ariz. -- The Tucson Supplemental Retirement System has placed a domestic equity manager on watch and may decide at its Nov. 18 board meeting whether to search for a replacement or an additional domestic equity manager, said Michael Parisi, treasury administrator at the $465 million defined benefit plan.
Mr. Parisi declined to name the manager, portfolio style or size.
Hewitt is assisting.
Louisiana teachers narrow search for 3 EAFE managers
BATON ROUGE, La. -- The Teachers' Retirement System of Louisiana narrowed to five finalists a search for three active EAFE managers to run a total of $900 million, said Dan Bryant, chief investment officer for the $10.2 billion fund.
Finalists are: Aronson + Partners; BPI Global; Capital Guardian; Nicholas-Applegate; and Putnam.
The hirings are due to contract expirations of Scudder Kemper, Salomon Smith Barney Asset Management and WorldInvest, all of which rebid. A decision is expected by October.
Curbs on cash balance could cause problems
WASHINGTON -- Legislation aimed at curbing cash balance plan abuses could backfire if additional regulation makes employers more reluctant to offer pension programs at all, according to Eric Lofgren, director of benefits consulting at Watson Wyatt Worldwide.
Lawmakers are facing several bills aimed at cash balance pension plans, many focusing on concerns that employers are converting their traditional pension plans as a way of cutting costs at the expense of older, longer service employees.
The irony is that in the 1980s, Congress legislated cuts in traditional pension benefits because they predominantly benefited longer service workers, Mr. Lofgren said. As a result, many companies switched to cash balance pension plans precisely to provide more benefits to younger, more mobile workers.
Securities regulators expect no Y2K glitches
WASHINGTON -- Securities regulators and industry groups are confident there will be no glitches in securities trading when the markets reopen in January. "We are able to report to 70 million investors that on the first trading day of the new millennium it will be business as usual," said Richard A. Grasso, chairman and chief executive of the New York Stock Exchange, at a press briefing.
Marc E. Lackritz, president of the Securities Industry Association, reiterated that sentiment, but added the industry also is developing contingency plans, including setting up a task force should problems occur. Meanwhile, the SEC has completed testing its computer systems and ensuring they are Y2K-compliant, Chairman Arthur Levitt said.
Brokerage firms and non-bank transfer agents that have not completed their Y2K compliance efforts by Nov. 15 must stop taking on new business and wind down operations by Dec. 1, Mr. Levitt said. The SEC will take legal action to stop firms that refuse to cooperate, he said.
HSBC implements new risk management program
NEW YORK -- HSBC Group, a worldwide financial services organization, has implemented RiskWatch for counterparty credit risk management software, developed by Algorithmics.
The project has resulted in regulatory capital savings for the bank's treasury and capital markets business by introducing more accurate counterparty risk methodologies.
"RiskWatch has given us an important technology platform upon which we can effectively model the risks inherent in our businesses," said Paulomi Shah, manager of group treasury at HSBC Holdings.
ULLICO expands real estate group
NEW YORK -- ULLICO will consolidate and expand its real estate-related activities under an umbrella organization to be known as the real estate investment banking group. It will handle both equity and debt project financing while continuing to make real estate investments for parent company ULLICO and its clients, which are mainly union pension funds. Herb Kolben, formerly director of mortgage investment at ULLICO, has been named vice president of the new unit.
IRS joins in cash balance fray
WASHINGTON -- The IRS filed papers supporting an appeal in a class-action lawsuit involving the conversion of Georgia-Pacific Corp.'s traditional pension plan into a cash balance pension plan. The IRS filed friend-of-the-court papers in Lyons vs. Georgia-Pacific Corp., now before the 11th U.S. Circuit Court of Appeals. A lower level court judge threw out the case earlier this year after determining the IRS regulations requiring companies to conduct complex calculations in determining lump-sum distributions were "an unreasonable construction of the congressional mandate set forth in ERISA." The IRS filing amicus contends its regulation is a valid interpretation of the pension law.
The IRS supporting brief "is definitely helpful. It is 100%consistent with what we (have been) saying all along," said Eva T. Cantarella, a partner at Hertz, Schram & Saretsky, representative for the plaintiffs. Greg Braden, a partner in Alston & Bird, representing Georgia-Pacific, declined to comment on the IRS involvement in the case, which arose when Jerry Lyons received a lump-sum disbursement of around $36,000 instead of $50,000, the value of his accrued actuarial benefit. The company argued it owed him the amount accumulated in his hypothetical account under the cash balance plan, and no more.
Traders cashing in on weather in Windy City
CHICAGO -- The Chicago Mercantile Exchange launched trading in the first exchange-traded, temperature-related weather derivatives. The CME will offer heating degree day index futures for four U.S. cities: New York, Chicago, Cincinnati and Atlanta.
The contracts are designed to provide a risk-management tool to help businesses protect their revenue during times of depressed demand or from excessive costs resulting from unexpected or unfavorable weather conditions.
Four firms that are very active in the OTC weather markets have agreed to serve as market makers for the new contracts: Aquila Energy, Castlebridge Weather Markets, Koch Energy Trading and Southern Energy.
CME HDD futures will be sized at $100 times the CME HDD index. The exchange will initially list monthly contract expirations from October 1999 through March 2000. The CME plans to add four cities -- Dallas, Philadelphia, Portland, Ore., and Tucson -- as well as listing cooling degree day index futures contracts for all eight cities.
At the same time, the CME will extend monthly contract expirations on HDD and CDD indexes for 12 months through December 2000.
Shareholder vote set on transfer of fund
NEW YORK -- Shareholders are scheduled to vote Dec. 13 on the transfer of the Third Avenue High Yield Fund to Pioneer Investment Management. If the transfer is approved, the assets would be put into a new fund, the Pioneer High Yield Fund.
Pioneer received preliminary approval to take over the fund from Third Avenue Funds because Pioneer hired the fund's manager, Margaret Patel. Ms. Patel has managed the fund since its inception in February 1998.
SEC adopts new conflict of interests rule
WASHINGTON -- The SEC adopted a rule aimed at preventing conflicts of interests when mutual fund portfolio managers and other employees buy and sell stock for their own accounts. Under the rule, a mutual fund's board of directors must adopt the fund's code of ethics, which must address personal trading practices. The rule also requires mutual fund officials to provide an initial listing of their securities holdings, updated annually. Moreover, portfolio managers and others involved in the fund's investment decisions must get advance clearance for investing in IPOs and private placements.
