SACRAMENTO, Calif. - CalPERS staff has recommended a target list of 15 active emerging markets managers to handle $1 billion to $1.5 billion. As previously announced, the $160 billion California Public Employees' Retirement System, Sacramento, plans to convert its $1.5 billion in emerging markets assets - now all passively managed by State Street Global Advisors - to active management.
Firms on the list are: Alliance Capital; Sanford C. Bernstein; Capital Guardian; Deutsche; Dimensional Fund Advisors; Foreign & Colonial; Genesis; Grantham, Mayo, Van Otterloo; J.P. Morgan; Putnam; Rexiter; Schroder; SSgA; Franklin Templeton; and Wellington Management. If approved by the board, target firms will be solicited this month, with selections slated for November.
However, CalPERS consultant Rosalind M. Hewsenian, managing director at Wilshire Associates, worried Alliance Capital's October purchase of Sanford C. Bernstein could result in significant organizational changes. She said she thinks their equity management platforms will be merged and she's worried about "the resulting culture clash." She also raised issues about Alliance's stock price, and the possibility that further cost savings will be achieved by reducing professional staff. Ms. Hewsenian also raised a concern that key Sanford C. Bernstein executives remain under three-year employment contracts, noting the disruption experienced after UBS purchased Brinson Partners and "senior executives left en masse." Officials at Alliance declined comment.
U.S. high court turns down
WASHINGTON - The U.S. Supreme Court in early April refused to review the dispute over lump-sum payments by Georgia-Pacific Corp.'s cash balance pension plan, but the case is not yet over. Last August, the 11th U.S. Circuit Court of Appeals, in Jerry L. Lyons vs. Georgia Pacific Salaried Employees Retirement Plan, upheld Treasury Department regulations that essentially state plan sponsors cannot give employees lump-sum payments that are less than the present value of the benefits they would receive at retirement age. The District Court has ordered the parties to meet with a mediator and see if they can resolve their differences. The company and the plaintiff's lawyers are scheduled to meet with the mediator in mid-May, said Eva Cantarella, a partner at the law firm of Hertz, Schram & Saretsky, Bloomfield Hills, Mich. "We're hoping that we can find some common ground for settlement. That is our position, we believe that is Georgia-Pacific's position as well," she said.
Audit claims Pittsfield transfer
of pension assets unlawful
PITTSFIELD, Mass. - The City of Pittsfield owes $700,000 to its $82 million pension fund, according to an audit by the state's Public Employee Retirement Administration Commission. The audit found the city owes the pension fund interest for manipulation of the funding schedule from 1994 to 2000 and unlawful transfer of funds. The audit found that more than $600,000 was unlawfully transferred from the pension fund to cover other city expenses and paid back without interest. The audit goes to the Massachusetts attorney general's office for further action.
Kevin Blanchette, PERAC deputy executive director, said the commission is conducting an audit of travel expenses by Pittsfield pension fund officials.
Former City Treasurer David Kiley, who was chairman of the Pittsfield retirement board, resigned in January amid an investigation of city budget shortfalls. Pittsfield retirement officials could not be reached for comment by press time.
Catch-all pension bill
introduced in Senate
WASHINGTON - Sens. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, and Max Baucus, D-Mont., have introduced a catch-all pension package that would make it easier for workers to save more for their old age and take their retirement money from job to job, and for small businesses to offer retirement benefits. The Retirement Security and Savings Act was co-sponsored by 15 senators. Mr. Grassley said he hopes the Senate will act on it this year.
Colorado Fire & Police
drops global fixed income
ENGLEWOOD, Colo. - The Colorado Fire & Police Pension Association eliminated its 8% active global fixed-income allocation, moving the assets to active domestic fixed income and increasing that allocation to 26% from 18%, said Bill Morris, chief investment officer. The $2.4 billion plan also moved active international equities to 23% from 25%; real estate to 6% from 8%; and alternatives to 8% from 5%. Active domestic equities remain at 35% and cash stays at 1%. Domestic fixed income increased to 27%.
The changes result from an asset allocation study, he said. No manager changes or searches are planned.
Parts of suit against
N.Y. Life thrown out
PHILADELPHIA - U.S. District Court in Philadelphia dismissed significant portions of a lawsuit against New York Life that challenged the investment of employee and agent pension fund assets in the company's proprietary mutual funds. The court found no evidence of fraud or racketeering and dismissed RICO claims against the company and plan trustees.
The court let stand the complaints as to whether New York Life fulfilled its fiduciary responsibilities in managing and investing the pension plan assets, as well as the employment termination claims made by James Mehling, the former New York Life employee who filed the lawsuit against the firm.
"The ruling by the court is a significant victory for New York Life ... it affirms that it is permissible for financial service firms to invest pension plan assets in in-house mutual funds," said William Werfelman, vice president, New York Life.
Mr. Mehling could not be reached for comment.
Washington State mulls
457 plan investment options
OLYMPIA, Wash. - The Washington State Investment Board this year will evaluate the investment options for its $1.6 billion 457 plan, said Gary Bruebaker, chief investment officer.
The board won't start looking at the plan until after a new asset allocation is adopted for its retirement plans, which total $45.5 billion, now slated for May. Any changes to the plan's investment options should be completed by September, Mr. Bruebaker said.