Arnott on diverted plane
First Quadrant managing partner Rob Arnott's flight to visit family in Toronto last Thursday took a little longer than expected. Flying from Los Angeles on Air Canada Flight 792, Mr. Arnott and the other passengers were escorted back to L.A. by two Air Force jet fighters after an Iranian passenger created a disturbance and was smoking in the bathroom. The man allegedly made an anti-American threat, but Mr. Arnott, who sat directly across the aisle from the man, said he did not hear him make any threats.
Mr. Arnott said the man was acting belligerent and appeared drunk, but he said he wasn't worried that the man was a threat. About 40 minutes into the flight, the plane returned to Los Angeles, and police stormed the plane and put a rifle to the man's head. The FBI interviewed everyone on the plane, Mr. Arnott said, and he didn't catch a flight to Toronto until more than 12 hours after the first flight took off. "It was a clear case of overreaction," said Mr. Arnott, "but in the context of what's been happening lately, it's fully understandable. But it was distinctly weird."
DOL OKs loans
The Labor Department is allowing plan sponsors to make interest-free loans to pension and retirement plans to cope with potential liquidity problems resulting from the recent disruption of the securities markets, according to a notice in the Sept. 28 Federal Register. The ruling is retroactive to Sept. 11; loans must be repaid by Jan. 9.
Federal pension law generally bans employers from making loans to employee benefit plans because of concerns over "potential overreaching or unfair terms," said Carl Wilkerson, chief counsel of securities at the American Council of Life Insurers, which requested this ruling from the Labor Department.
IBM suit gets go-ahead
A class-action lawsuit against IBM's pension plan has gotten the green light. Judge G. Patrick Murphy of the U.S. District Court for the Southern District of Illinois certified that about 140,000 current and former employees of Big Blue are eligible plaintiffs in the Cooper vs. IBM suit filed in October 1999. The plaintiffs are challenging the validity of the changes made to the pension plan in 1995 and again in July 1999, when the firm did its cash balance conversion. They also are alleging that IBM partially terminated its pension plan because the July 1999 amendments, which reduced benefits for many employees, so increased the level of overfunding that the chances of the company's siphoning excess assets are greatly increased.
N. Carolina measure opposed
A proposal allowing state Treasurer Richard H. Moore to invest up to 5% (up from 1%) of the $59 billion North Carolina Employees' Retirement System in alternatives faces opposition from state Rep. Fern Shubert, a Republican.
The bill already has been approved by the state Senate.
Ms. Shubert believes it is "incredibly bad policy to use pension funds for socially targeted investments." Pension fund fiduciaries, she adds, have an overriding responsibility to invest solely in the interest of beneficiaries.
PRIM seeks lending firm
Massachusetts Pension Reserves Investment Management Board is searching for a firm to administer securities lending services. The $29 billion pension fund will issue a request for bids this week, said Jerrold Mitchell, CIO. The board is satisfied with incumbent Goldman Sachs, whose contract expires at the end of the year, but decided to test the market since it hadn't entertained bids for securities lending in the past, Mr. Mitchell said.
Chicago Teachers keeps Mercer
The $9.1 billion Chicago Public School Teachers' Pension & Retirement Fund renewed William M. Mercer Investment Consulting's contract for two years. No other consultant was considered.
CalPERS renews ties with 11
The California Public Employees' Retirement System extended contracts for its 11 active domestic equity managers for one year. The managers are: Alliance/Sanford C. Bernstein; The Boston Co.; Brown Capital; Geewax, Terker; Goldman Sachs; J.P. Morgan Fleming; Oak; Oppenheimer Capital; Osprey; Putnam; and Pzena.
Separately, CalPERS' investment committee approved a proposal to hire an independent consulting firm to help develop and implement a new evaluation process for the $155 billion fund's consultants.
Philadelphia hires Aronson
Philadelphia Public Employees' Retirement System hired Aronson + Partners to manage $100 million in active domestic large-cap value equities, said CIO Tony Johnson. The $5 billion system funded the hire by reducing a $160 million large-cap value index fund managed by Deutsche.
Methuen selects INVESCO
The Methuen (Mass.) Contributory Retirement System hired INVESCO to manage an active domestic large-cap core equities portfolio. The $67 million system had planned to allocate $25 million to INVESCO, but that might change because of the market's recent steep decline, said Kevin Leonard of consultant Segal Advisors. Funding will come from reducing a balanced portfolio run by David L. Babson.
Active management gets boost
Zurich Scudder's institutional business will be incorporated into Deutsche Asset Management as a result of Deutsche Bank's $2.5 billion acquisition of Zurich Scudder Investments. The combined institutional entity, which will have $500 billion in institutional assets worldwide, will use the Deutsche name, said Tom Hughes, CEO of the new organization. The retail side will use the Scudder name.
On the institutional side, the acquisition gives Deutsche, which has predominantly passively managed assets, "a strong presence in actively managed products," said Mr. Hughes, who was COO of Deutsche Asset.
Overall, the combined organization will have $900 billion in assets under management worldwide, making it the world's fourth largest money manager. Edmond Villani, former Zurich Scudder CEO, will be chairman.
New Mellon unit
Mellon Institutional Asset Management launched Mellon Growth Advisors. Francis Antin, CEO of Mellon affiliate The Boston Co., was named CEO of the new unit. He will run both units for the time being, said Ronald O'Hanley, CEO of Mellon Institutional. Robert Potvin, former vice president at the Boston Co., will head up the sales and marketing.
The new unit's investment team will be staffed by portfolio managers moving from State Street Global Advisors, including Edward Allinson, David Smith and Emerson Tuttle. At least three additional investment professionals are moving to Mellon from SSgA, Mr. O'Hanley said.