Plaintiffs get class-action OK in New York Life suit
PHILADELPHIA - A U.S. District Court judge granted class-action status certification for participants in New York Life's defined contribution and pension plans who filed suit against the company. The suit, filed in the Eastern District of Pennsylvania last year on behalf of 50,000 former and current New York Life employees and agents, claims the company used billions of dollars in internal pension and 401(k) plan assets to seed the MainStay Institutional Funds line. They also complained that the MainStay funds collapsed as a result of New York Life's withdrawal of nearly $2 billion in the wake of the lawsuit and plaintiffs' allegations of misconduct.
The trial in the case is expected to begin late in 2002.
Report: U.S. institutions hold firm on long term
GREENWICH, Conn. - U.S. institutional investors are not changing their long-term asset strategies, although most have shifted assets in the short term, according to a new Greenwich Associates report. The average respondent's allocation to domestic equities was 49%, down two percentage points from September 2000; and the average international equity allocation was 11%, down one percentage point from a year earlier. Global fixed income made up 25% of the average portfolio last month, up two percentage points from the same time last year. Also, the average allocation to stable-value investments and GICs rose to 5%, from 4% last year. The remaining assets were allocated to equity real estate, 4%; alternatives, 2.5%; hedge funds, 0.5%; and other, 2.5%.
In addition, public and private pension funds reported their total assets dropped an average of 7% for the year ended June 30, while endowments and foundations lost 5% of total assets, on average.
The study looked at 95 public and private pension funds, endowments and foundations, each of which had assets ranging between $250 million and $5 billion, said a Greenwich spokesman. Only 33 of the 95 respondents were interviewed after Sept. 11.
Oklahoma Firefighters switch S&P 500 fund to equal weighted
OKLAHOMA CITY - Oklahoma Firefighters' Pension & Retirement System, Oklahoma City, switched an $80 million S&P 500 index fund managed by State Street Global Advisors to equal weighted from cap weighted, said Robert Jones, executive director. After a search, the $1.2 billion fund stayed with SSgA because it had the lowest bid, he said.
The fund also has narrowed its search for a manager to handle $70 million in active domestic large-cap growth equities, and the decision should be made at the Nov. 16 board meeting, he said. The four finalists are: Chase Investment Counsel; Holt-Smith & Yates Advisors: Goldman Sachs Asset; and INTECH. He would not comment on the funding source.
The fund's current allocation is 61% equity, 36% fixed income and 3% cash.
Donnelley to conduct asset-liability study
CHICAGO - R.R. Donnelley & Sons Co. Inc. will conduct an asset-liability study in early 2002. The pension trust fund has $1.6 billion in assets, said Kelly Heisler, a Donnelley spokeswoman, in a written statement. The study should be done by the middle of next year, and the fund is not accepting inquiries.
Wurts & Associates is assisting.
Prince William County to select investment consultant
WOODBRIDGE, Va. - The Prince William County Police and Fire Supplemental Retirement System plans to select its first investment consultant at a Nov. 18 trustees meeting. The $12 million system has two finalists, said Bob Willard, portfolio manager. He would not name the finalists.
Judge: CalPERS can't bypass state law in paying managers
SACRAMENTO, Calif. - A California state court judge said CalPERS does not have the authority to set its own payroll system for 10 internal portfolio managers, circumventing other state agencies. The tentative ruling from the Superior Court of California provides an initial victory for state Controller Kathleen Connell, who had sued the board of the $144 billion California Public Employees' Retirement System, Sacramento, for setting up its own pay system.
The ruling, which has been stayed temporarily, said CalPERS is subject to state law like other state agencies. Judge Charles C. Kobayashi found that Proposition 162 "does not give CalPERS the power it claims here." If CalPERS officials believe they are right, they should have challenged the controller and Department of Personnel Administration in court, the judge ruled.
Last year, the state Department of Personnel Administration refused to put through 11% raises for the affected portfolio managers. Claiming authority under Proposition 162, an amendment to the state constitution that gives CalPERS protection from political interference, the CalPERS board issued pay letters to Ms. Connell to implement the pay hikes, which she refused to honor. The board then decided to set up its own payroll system and cut checks directly to the affected employees, leading to Ms. Connell's court challenge.
Public funds mulling roles in possible Enron action
Some major public pension funds are evaluating whether to become actively involved as lead plaintiffs in any class-action securities litigation related to Enron Corp.'s financial issues - related to the sharp drop in the firm's stock - which are under formal investigation by the SEC.
Michael G. Lange, partner in Berman DeValerio Pease Tabacco Burt & Pucillo, said the law firm is monitoring the Enron situation for some pension clients, which he declined to name. In the current Enron situation, he said the deadline for filing an application to become a lead plaintiff is Dec. 21.
Specialty managers on rise among U.K. pension funds
GREENWICH, Conn. - U.K. pension plans have almost doubled their use of specialty money managers over the past three years, with 75% of U.K. funds using specialty mandates as of June, compared with 40% of U.K. funds in June 1998, according to new research published Nov. 7 by Greenwich Associates. Smaller pension plans and local authority plans, as well as large corporate plans, have been shifting to specialty managers, said John Webster, Greenwich consultant.
U.K. pension plans also are increasing their allocations to international equities and bonds. Average active investment in domestic equity has fallen to 33% of total assets as of June, compared with 40% in 1998. Investment in fixed income increased during the same period to 21% of total assets, from 14%.
Just more than a third of the market now uses customized benchmarks, but the report said that number is likely to increase following the shift to specialty managers and the introduction of the Myners Review recommendations that require U.K. pension plans to use customized benchmarks.
NEBF trustees to pay fund $4.95 million in settlement
ROCKVILLE, Md. - Trustees of the National Electrical Benefit Fund must pay $4.95 million to the $9.2 billion fund as part of a settlement in a civil lawsuit brought by the Labor Department in 1999. The payment is restitution for lending $6 million in pension assets in 1992 and 1993 to Columbia Land and Development Corp. to acquire and develop land in Orlando, Fla. The Labor Department alleged the trustees should have known the loan could not be repaid in full with interest. Fund trustees also purchased shares in a limited partnership controlled by Columbia owners Terence R. McAuliffe, currently Democratic National Committee chairman, and his wife, Dorothy S. McAuliffe.
The consent order, announced last month, also requires trustee John M. Grau, executive vice president of the National Electrical Contractors Association, and former trustee Jack F. Moore, former international secretary of the International Brotherhood of Electrical Workers, to pay a civil penalty of $550,000 total. Messrs. Grau and Moore did not admit to any wrongdoing or liability.
The trustees were accused of imprudently lending plan assets. Sources close to the fund also said the DOL can't make any claim against Mr. and Mrs. McAuliffe, who could not be reached for comment by press time.
Richard Ben-Veniste, Mr. McAuliffe's attorney, pointed out that "Mr. McAuliffe was not charged with any impropriety" and said he had cooperated with the investigation and given a deposition.
Regulation FD continues to draw attention
Corporations still are hiding behind Regulation Fair Disclosure as an excuse not to provide detailed financial information, according to an AIMR survey of financial analysts. A year after implementation of the SEC rule, analysts found that earnings guidance, forward-looking information and details about internal operations, costs and pricing, and sales volume are less available now. On a positive note, the Association for Investment Management and Research, Charlottesville, Va., found that more investment professionals are doing more legwork, and their opportunities to participate in company conference calls and webcasts have increased, as have company e-mail alerts.
Separately, the National Investor Relations Institute wants the SEC to make it easier for companies to communicate with securities analysts without being hamstrung by the Fair Disclosure rule.
In comments to Harvey L. Pitt, SEC chairman, the trade organization asked for clarification of "seemingly inconsequential" information companies can provide analysts about their earnings without tripping up on the rule. The SEC also was asked to permit executives to call analysts who do not update their earnings estimates after companies issue public earnings guidance.
The NIRI also wants a clarification on the extent to which communications between companies and media are exempt from the rule.
Retirement Savings Summit slated for Feb. 27-March 1
WASHINGTON - The next Summit on Retirement Savings conference will be held Feb. 27 to March 1 at the Capital Hilton Hotel in Washington, said Elaine L. Chao, secretary of labor. The first conference, mandated under the SAVER Act of 1997, was held in Washington in June 1998.
Bank of New York launches Global Transition unit
NEW YORK - The Bank of New York launched BNY Global Transition Management, a separate unit assisting institutional clients with changes in investment managers and asset allocation. Services will be sold through the division's own sales department, said Frederick Graboyes, BNY managing director, who will oversee the new division. Transition management had been handled by various departments.
The new division plans to be able to handle transitions online sometime in 2002, he said.
Scholarship fund for Sept. 11 victims' families, survivors
CHARLOTTESVILLE, Va. - The AIMR is launching a scholarship fund to benefit permanently disabled survivors as well as families of victims of the Sept. 11 terrorist attacks. The Association for Investment Management and Research is providing an initial grant of $1 million and invites members and chartered financial analyst candidates to make additional contributions. At least 56 AIMR members and CFA candidates were killed during the attack. Contributions can be made online at www.aimr.org or can be mailed to: AIMR 11 September Memorial Scholarship Fund, P.O. Box 3668, Charlottesville, VA., 22903-0668.