The U.S. Supreme Court has agreed to decide whether pension plans can sue brokerage firms and other advisers for their roles in money-losing deals.
The dispute centers over whether Ameritech's pension fund and its trustee, Harris Trust, can recover more than $20 million lost as a result of two motel chain investments structured by Salomon Brothers in the late '80s.
Ameritech and Harris sued Salomon, claiming the investments violated ERISA. Salomon argued it could not be sued because it is not a fiduciary.
The case landed before the Supreme Court after the 7th U.S. Circuit Court of Appeals threw it out.
CalSTRS issuing RFPs
The $110 billion California State Teachers' Retirement System plans to issue by the end of this month an RFP for its $41 billion in externally managed passive equities, said Patrick Mitchell, chief investment officer.
Currently, BGI manages $24 billion in domestic equities: $17 billion tracking the S&P 500 index and $7 billion following an extended-market index. BGI also runs a $15 billion mandate tracking the MSCI EAFE index. State Street Global runs a $2 billion passive emerging market mandate that tracks the MSCI Emerging Markets Free index. Next month, CalSTRS will issue an RFP for a global custodian. Responses are due in April; finalist interviews are slated for June. The incumbent is State Street Bank, whose contract will be extended while the search is conducted. State Street is expected to rebid. Pension Consulting Alliance is the consultant.
Armco pension execs gone
AK Steel Holding has taken control of Armco Steel's $2.4 billion in pension fund assets and let go the employees who were running the fund. AK and Armco merged in September; the combined pension assets total about $4 billion. Armco's Dennis B. Fury, director-pension investments, and Leo Cook, head of fixed income, retired. Patricia Edgington, manager of investment administration, and Karen Billingham, who did back-office work for the plan, were terminated. Christopher C. Motley, treasury operations analyst and head of the pension fund at AK Steel, would not discuss plans for the pension fund.
Stanford CEO resigning
Laurance Hoagland, president and CEO of Stanford Management, which runs Stanford University's $6 billion endowment, will step down once a successor is found, but no later than Aug. 31.
Beginning January 2001, Mr. Hoagland will oversee the investment portfolio at the $2.5 billion Hewlett Foundation, replacing current Treasurer William Nichols, who plans to retire. Stanford has begun a national search for a new president and CEO.
Swiss Air terminates plan
Swiss Air Transport is enhancing its 401(k) plan following the termination of its defined benefit plan, said Jean-Michel Groux, finance manager. Mr. Groux said the company will increase its match to 4% from 1% of employee contributions.
Employees have until February to move their defined benefit assets into the 401(k) plan if they choose. Mr. Groux, who could not provide a current asset total, estimated the 401(k) plan will have $40 million after the transition. The plan is managed by a joint venture between J.P. Morgan and American Century.
The defined benefit plan, which was terminated Oct. 1, had $97 million in assets and $72 million in liabilities, according to the PBGC. It wasn't clear how much of the $25 million in surplus assets would revert to the company after any taxes or any possible distributions of the surplus to participants. The PBGC didn't know and Mr. Groux declined to comment.
U.S. equity managers eyed
AMR Investment Services, which oversees $12 billion in retirement assets for American Airlines Inc., is beginning to look at its domestic equity managers with the potential to make some changes later this year, said William Quinn, president of AMR.
At issue is AMR's longstanding value-style bias. It is working with its nine domestic equity managers to determine whether they should put more emphasis on future earnings of companies, he said.
AMR, however, would not abandon value investing for growth, he said. But it potentially could be "looking at firms who look at both sides (value and growth) with a little more vigor."
Lawmakers join proxy fight
Rep. Bernard Sanders, I-Vt., and 45 other lawmakers are asking the SEC not to let IBM exclude from its proxy a shareholder proposal relating to its cash balance pension plan. The proposal had been submitted to IBM last fall by 330 employees and former employees who also are shareholders.
IBM asked the SEC to let it exclude the proposal from its proxy on grounds that it relates to ordinary business and employees' personal grievances.
Mr. Sanders and the other lawmakers, in a Jan. 5 letter to SEC Chairman Arthur Levitt, claim the company's pension plan is discriminatory.
Munder gets CEO
James C. Robinson, Munder Capital Management's CIO for fixed income, was promoted to CEO. He replaces Michael T. Monahan, who will become chairman of Munder. Mr. Monahan served as CEO briefly, after Paul D. Tobias left in October. Peter G. Root, vice president of government securities trading, assumed Mr. Robinson's CIO duties.
Maryland names CIO
Carol Boykin has been named chief investment officer at the $31 billion Maryland State Retirement Systems. She replaces Carol Casey, who moved to the Massachusetts Pension Reserves Investment Management Board last year. Ms. Boykin had been deputy CIO at Lucent Technologies, where she has not yet been replaced.
Fund replaces Valenzuela
The $115 billion New York State Common Retirement Fund terminated Valenzuela Capital Partners because of poor performance and organizational concerns, said spokesman Jeffrey Gordon. Valenzuela ran $43 million in midcap equities as part of the pension fund's multiple emerging manager program with Progress Investment Management. Valenzuela executives did not return calls seeking comment by press time.
Fan Asset Management was hired to replace Valenzuela and received initial funding of $63 million for midcap equities.
Carpenters' fund sued
The Labor Department has sued the Carpenters' Pension Fund Trust-Detroit and Vicinity, claiming the fund used plan assets to make mortgage loans to participants. Such loans are not allowed by the plan.
Under the lawsuit, the Labor Department seeks to require the plan and its trustees to undo the loans and repay the plan, as well as make up for any losses it incurred in undoing the loans.
According to the lawsuit, the plan's trustees authorized AAA Mortgage to make mortgage loans since September 1995, and let participants pledge their vested accrued retirement benefits as collateral, even though the plan expressly forbids such pledges. As of July 30, the outstanding principal of the mortgage loans exceeded $14.7 million, according to the suit.
The plan had $1.04 billion in assets as of April 30, 1998, according to the suit.
Foundation hires Penn
The $20 million St. Joseph's Foundation hired Penn Capital Management to run a $1.7 million small-cap value equity portfolio, said Christian Noyes, a partner of Penn Capital. The money came from cash flow. Canterbury Consulting assisted.
Fujitsu picks Baillie Gifford
Fujitsu Telecommunications pension plan hired Baillie Gifford to take over managing a 37 million ($59.2 million) balanced portfolio from incumbent Phillips & Drew Fund Management. Baillie Gifford will be the plan's sole manager. KPMG assisted.
Arizona fund taps Cutler
The Industrial Commission of Arizona named Cutler to run a $22 million domestic value equity portfolio for the $300 million workers' compensation fund. Cutler replaces Sloate Weisman Murray, said Doug Newton, administrative manager.
Sloate was terminated late last year due to poor performance. Representatives did not return calls for comment by press time.
Performance Analytics assisted.
Avis replaces manager
Avis Pension Trustees dropped Phillips & Drew Fund Management in favor of Baillie Gifford to run a 44 million ($70.4 million) balanced portfolio. The portfolio covers the entire capital of the U.K. pension plan. "We have had good performance from PDFM over the 15 years we have been with them . . . but the requirements of the plan and the trustees have changed," said Delia Nicholson, director of pension and benefit services.
Buck Consultants assisted.
Firm starts 401(k)
Schrudder Performance Group, a management consulting and information technology firm, has started a 401(k) plan for its 20 employees. Schrudder hired Fifth Third Bank as bundled provider for the $207,000 plan that so far does not contain a company match, said Mitch R. Schrudder, president and CEO. The plan will offer eight investment options.
CalPERS sponsors proposal
Proxy Monitor, a proxy voting advisory firm, has recommended that shareholders of Tyson Foods vote for a proposal to require the company to provide all shares with equal voting rights.
Sponsored by the California Public Employees' Retirement System, the proposal will be voted on at Tyson's Jan. 14 annual meeting