WASHINGTON -- The U.S. Supreme Court let stand a federal appeals court decision that Unisys Corp., Blue Bell, Pa., did not breach its fiduciary duties under federal pension law when it bought more than $200 million in GICs from Executive Life Insurance, which went belly up in 1991. The 3rd U.S. Circuit Court of Appeals ruled earlier this year in a 2-1 decision, upholding a lower federal court's decision. The Supreme Court refused to accept the plaintiff's appeal, ending eight years of litigation.
IRS and Treasury Department seek cash balance comments
WASHINGTON -- The IRS and Treasury Department are collecting public comments on cash balance conversions, according to a notice published in the Federal Register. The regulatory agencies are seeking input on related issues including wearaway provisions, and are coordinating their review of the legal issues with other federal agencies that have overlapping jurisdiction over pension and age discrimination laws. The deadline is Jan. 19.
Hiring expected soon for director of investments
HARTFORD, Conn. -- The City of Hartford Municipal Employees' Retirement Fund expects to decide this month on hiring a director of investments, said Kathleen Palm, city treasurer and secretary of the pension commission for the $975 million fund.
The position will be full time, replacing Cynthia Steer, who had been a part-time, in-house consultant for the fund. Ms. Steer is now chief investment officer and senior vice president for SBLI New York.
Orange County system defers private equity decision
SANTA ANA, Calif. -- The Orange County Employees Retirement System decided to defer any further commitment this year to the Brinson Fund, managed by Brinson Partners, which runs about $50 million for the system in a separately managed private equity and venture capital program. The decision is the result of an annual review of private equity commitments, said Farouki Majeed, investment officer of the $4.4 billion fund.
Changes at home and abroad for San Francisco fund
SAN FRANCISCO -- The San Francisco City & County Employees' Retirement System has approved changes to its domestic and global fixed-income benchmarks.
The domestic benchmark will be the Lehman U.S. Universal index and the global benchmark will be the Lehman Global Aggregate Hedged index, replacing the Lehman Aggregate and the Salomon World Government Bond indexes.
The change was made because bond markets are increasingly "bigger and more complex," said Dick Piket, senior investment officer, fixed income, for the $11 billion fund.
Performance review may mean changes in the offing
AUSTIN, Texas -- The City of Austin Employees' Retirement System is reviewing the performance of its nine investment managers, following asset-liability and asset allocation studies. While no allocation moves resulted, some manager changes might be made, said Cathy Harrington, pension director. While it is too early to tell which managers might be affected, she said, she expects trustees of the $1.1 billion fund to make final determinations by mid-November.
PBGC takes over McCulloch's underfunded plan
WASHINGTON -- The PBGC has taken over the underfunded pension plan of McCulloch North America, a bankrupt Tucson, Ariz., maker of chainsaws and related tools that shut its doors in January and is liquidating. The plan, with assets of $32 million, is underfunded by about $7 million and was shut down effective Oct. 29, 1997, under an agreement with the Pension Benefit Guaranty Corp.
CalSTRS purchases Texas retail complex
SACRAMENTO, Calif. -- The California State Teachers' Retirement System closed on Alamo Plaza, a retail complex in San Antonio, said Patrick Mitchell, chief investment officer for the $100 billion fund. The system bought the 530,000-square-foot center from Trammell Crow for $89 million. C.B. Richard Ellis Investors assisted.
L.A. City Employees increases venture cap investments
LOS ANGELES -- The Los Angeles City Employees' Retirement System has increased its investment in Richland Ventures III, a venture capital fund, to $18 million from $15 million.
The board for the $7 billion fund is also expected to make a decision on its searches for a core value real estate separate account manager and a general consultant within the next couple of months.
Ohio teachers enter joint real estate venture
COLUMBUS, Ohio -- The State Teachers Retirement System of Ohio has entered into a joint venture with Prime Group Realty Trust, which purchased a 50% interest in 77 W. Wacker Drive, Chicago, said Steve Mitchell, chief investment officer at the $53 billion system. The pension fund has invested $66 million in preferred stock and $22 million in common stock in the venture, while Prime Group Realty invested $22 million in common stock. The 944,000 square-foot office tower is valued at $280 million.
Search for administrator for part-timers plan narrows
LOS ANGELES -- The City of Los Angeles Deferred Compensation Board has received proposals from First Financial Administrators, Great West Life & Annuity Insurance and Mid-America in response to its search for an administrator for its $24 million 457 plan for part-time employees .
A subcommittee that includes two board members will review the proposals.
The current plan administrator is First Financial Administrators and the provider of the plan's single fixed-account type options is American United Life. The contract with First Financial expires Dec. 31.
William M. Mercer is the consultant.
Castle Harlan acquires stake in Australian firm
NEW YORK -- Castle Harlan has agreed to acquire a 50% stake in the business of private equity manager Australian Mezzanine Investments to make private equity buyout investments in Australia, New Zealand and areas of Asia. Terms were not disclosed.
The new company, to be known as Castle Harlan Australian Mezzanine Partners Pty. Ltd., and Castle Harlan launched separate buyout funds that will raise a total of $300 million from their two firms and investors in their existing funds.
Investors in Castle Harlan funds include the $47.3 billion Bell Atlantic Master Trust, New York; the $12 billion American Airlines pension fund, Fort Worth, Texas; and the $52.6 billion IBM Retirement Fund, Stamford, Conn.
Firstar and Mercantile blend asset groups
MILWAUKEE -- Firstar, which merged with Mercantile Bancorp Sept. 20, will combine the asset management subsidiaries of each company. Firstar Investment Research & Management and Mississippi Valley Advisors will merge early next year under the FIRMCO name, said Mary Ellen Stanek, president and chief executive.
Firstar's investment management division will maintain offices in Milwaukee and St. Louis, with the latter headed by John Blixen, now president and chief investment officer of MVA.
Ms. Stanek and Mr. Blixen said they don't anticipate staff having to move, although the eight equity analysts working for each company will be formed into a more tightly knit team and overlap between sector and industry coverage areas will be eliminated.
FIRMCO's assets under management totaled $25.1 billion (50% institutional) and MVA's totaled $9.5 billion (80% institutional) as of Sept. 30.
Lincolnshire raises half of desired capital
NEW YORK -- Lincolnshire Management has raised an initial $200 million for its second fund, Lincolnshire Equity Fund II, which is targeted at $400 million.
Institutional investors include the $47 billion Bell Atlantic Master Trust, New York.
The fund will invest in small to midsized U.S. companies.
Ascent Asset Management acquires Robert R. Meredith
NEW YORK -- Ascent Asset Management acquired Robert R. Meredith. Terms were not disclosed.
The firms will be combined to form Ascent/Meredith Asset Management, with nearly $1 billion under management. The bulk of the assets -- about $900 million -- come from Meredith; about 25% of those assets are from institutional investors, said Peggy A. Farley, president and chief executive.
She is also chief investment officer for Ascent/Meredith Portfolio Management, the asset management subsidiary, which structures balanced portfolios comprising stocks, bonds and mutual funds. Ms. Farley manages equities for the subsidiary, and Wolfgang Schoellkopf heads fixed-income strategy.
Robert R. Meredith will become the company's broker-dealer subsidiary.
In a separate move, the company formed Ascent Private Equity, a merchant bank that will provide capital to startup and early mezzanine-stage companies. The company, led by Mark Maciejewski, president and chief executive, will initially raise $100 million for the Ascent Medical and Technology Fund, its first fund. Mr. Maciejewski just joined the firm from the medical products industry.
Hancock purchases Alabama timberland
BOSTON -- The Hancock Timber Resource Group has agreed to acquire 412,000 acres of Alabama timberland from Alliance Forest Products for $310 million.
The purchase is Hancock's largest of its 52 acquisitions. It includes 372,000 acres owned by Alliance as well as the sale of leases on another 40,000 acres.
Hancock manages timberland investments for the $160 billion California Public Employees' Retirement System, Sacramento; the $23 billion Public Employees' Retirement Association of Colorado, Denver; and the $2.1 billion Colorado Fire & Police Pension Association, Englewood.
Defined benefit plans might experience a revival
WASHINGTON -- Traditional defined benefit plans may make a comeback in the next decade as the American work force ages, a pension consultant told a citizens group advising the Labor Department.
Eric Lofgren, director of the benefits consulting group at Watson Wyatt Worldwide, testified before the ERISA Advisory Council working group studying hybrid plans that research shows older workers prefer traditional plans. Moreover, baby boomers who have not saved enough on their own and can't count on government bailouts especially are going to favor defined benefit plans.
First American forms passive quant group
MINNEAPOLIS -- First American Asset Management, a subsidiary of U.S. Bank, has formed a quantitative group to manage the company's passive investments. Walter French has been recruited from Berkeley Quantitative Advisors as portfolio manager and director.
Mr. French will run two existing institutional strategies -- an enhanced index and a Standard & Poor's 500 index program, which he had managed as a subadviser since the portfolios' inception in 1990.
He was co-founder and chief investment officer/portfolio manager of Berkeley Quantitative Advisors, which is not replacing him, a spokesman said.
Mr. French also will run two First American mutual funds, the Equity Index Fund and the International Index Fund. Management of the funds had been overseen by Jim Rovner, a midcap value portfolio manager, who will concentrate on active management strategies.
Cash balance plans linked to richer 401(k) plans
BETHESDA, Md. -- Employers offering cash balance plans are likely to offer richer 401(k) retirement benefits than those with traditional pension plans, according to data from Watson Wyatt Worldwide. The consulting firm studied 612 employers, including 489 with traditional plans and 72 with cash balance plans. All also offered 401(k)s.
Companies with cash balance plans contributed 1.03% of pay in non-matching contributions to the 401(k) plans, compared with 0.5% for companies with traditional plans. And those with the cash balance plans contributed 3.02% of pay in matching 401(k) plan contributions, compared with 2.72% for those with traditional plans.
