CalSTRS benchmark change
CalSTRS staff proposed adopting the Russell 3000 index (ex-tobacco) as its domestic equity benchmark, which could lead to major changes for its $32.7 billion in passive domestic equity assets. The change also would affect the fund's $8 billion in active U.S. equities run by external managers, although no manager changes are expected.
A switch to the Russell 3000 index would reverse a move to the combined S&P 500 and Russell Small Cap Completeness indexes, both ex-tobacco, which the $101 billion fund adopted just last May.
Pension shortfalls rise
Twenty-eight of the nation's 50 largest corporations had pension shortfalls in 2001, compared with eight plans two years earlier, a study by Milliman USA shows. The study also shows the 50 corporate plans collectively lost more than $140 billion - nearly 90% of surplus pension assets - between 1999 and 2001.
The average assumed return on pension assets in 2001 was 9.39%, producing expected returns of more than $54 billion for the 50 funds, but in fact they collectively lost $36 billion.
Comfort level remains OK
Only 25% of 401(k) plan participants feel less comfortable about their company stock holdings as a result of the Enron scandal, according to a study by Boston Research Group. Only one in eight reduced company stock holdings since the company's collapse.
More than half agree they invested in company stock to show loyalty to their company.
NYS Teachers to search
Separately, the system terminated Lincoln Capital Management because of performance and personnel changes; Lincoln ran $314 million in active domestic large-cap growth equities. The money will be run passively in-house.
Alexander Knowles, marketing director at Lincoln, said, "We had a tough period in the fourth quarter of 2000 and the first quarter of 2001, when big-cap funds got hit hard. Since they're all doing well now, we wish they (NYSTRS) had stuck with us..."
The system also put Alliance Capital, Peregrine Capital and Putnam Institutional on watch for performance.
In addition, it rehired Morgan Stanley to run $863 million in active international equities; Cohen & Steers, $226 million in active REIT and real estate operating companies and $81.7 million in income-oriented REIT and REOC strategies; Lend Lease Rosen Real Estate Securities, $152 million in REITs and REOCs; and RREEF Real Estate Securities, $146 million in REITS and REOCs.
Union: Stay in Florida DB plan
American Federation of State, County and Municipal Employees, Council 79, recommends its members remain with Florida's $96 billion defined benefit plan and not move to the state's new defined contribution plan, said Rich Ferlauto, AFSCME union director of investment policy.
The union also wants the state to delay the launch of the defined contribution plan, scheduled for June 1, until the Florida State Board of Administration resolves its dispute with Alliance Capital over failed investments in Enron.
Tom Herndon, the SBA's executive director, said the board won't halt the launch unless the Legislature so directs.
CalPERS issues focus list
CalPERS named Lucent Technologies, NTL, Qwest Communications, Cincinnati Financial and Gateway to its focus list, representing "some of the worst examples of poor financial and governance performance" among corporations, a statement said.
Officials of the $149 billion pension fund said Lucent is refusing to adopt a shareholder proposal to declassify its board, even though it passed by a shareholder majority last year; NTL has repriced options in recent years, and its board is "replete with interlocking directors."
Qwest "has a number of egregious conflicts of interest" and executive pay issues, according to CalPERS; Cincinnati Financial has a lack of independent directors; and Gateway "has not answered requests from CalPERS to meet" about poor shareholder return and governance performance.
6 get Oregon bond money
The $36.5 billion Oregon Public Employees' Retirement Fund will allocate its remaining $2.2 billion in internally managed fixed-income assets among its six external bond managers, said Mike Mueller, interim director-investments. Five active managers will have accounts totaling $1.9 billion each: Alliance Capital; BlackRock; Fidelity; Wellington; and Western. BGI's $227 million passive portfolio, used for only rebalancing purposes, will be increased to $500 million.
Frank Russell assisted.
Grayson pleads guilty
Jeffrey Grayson, former chief executive officer of money manager Capital Consultants, pleaded guilty April 23 to one count each of mail fraud and aiding in the preparation of a false tax return. He admitted to a scheme that defrauded Capital clients from 1994 to September 2000. The charges could carry an eight-year prison term and fines of $500,000. Sentencing is scheduled for Jan. 9.
W. Va. mulls bond sale
West Virginia Gov. Bob Wise is expected by the end May to authorize the state to issue $3.9 billion in pension obligation bonds to pay off much of the state's unfunded pension liabilities, said Greg Burton, secretary of administration.
Plymouth County hires 3
The $424 million Plymouth County Retirement System hired Columbia Management to run $10 million in active domestic high-yield fixed income; Boston Co., $5 million, active emerging markets value equities; and State Street Global Advisors, $5 million, active emerging markets growth equities.
Funding will come from a temporary, internally managed Russell 2000 index fund, which had $75 million in assets, said John F. McLellan, chairman and treasurer.
Fund powered by Amex
Minnesota Power hired American Express as bundled provider of its recently combined 401(k) plan and ESOP, with $200 million in assets, said Nicole R. Johnson, human resources analyst. The plans were managed internally.