Pension woes hurt UAL
United Air Lines' application for a $1.8 billion federal loan guarantee was rejected in part because the Air Transportation Stabilization Board "has substantial concerns about the underfunded status of United's pension plan," according to the board's letter to UAL Corp.
The ATSB "is concerned about United's ability to generate sufficient cash flows to meet its pension funding obligations concurrent with other obligations, including repayment of the guaranteed loan."
The plan is underfunded by $2.52 billion, according to UAL's latest annual report. UAL reported pension assets of $7.575 billion and pension liabilities of $10.095 as of Dec. 31.
Storm tosses managers
Thursday's massive East Coast snow and ice storm wreaked havoc with money managers, particularly in the Carolinas.
A portfolio manager at Smith Breeden Associates in Chapel Hill, N.C., had his car crushed when an ice-laden tree fell on it, said Daniel C. Dektar, senior vice president and director of portfolio management. The manager worked from home, one of the lucky few with power and a working phone in his house, Mr. Dektar said.
Smith Breeden's offices lost power on Thursday, canceling the office Christmas party, but backup systems and cellular phones allowed the firm to function. "We were slightly diminished, but not disabled," Mr. Dektar said. Power was restored by Friday.
In Charlotte, Sterling Capital Management had to rely on an Internet connection to Bloomberg because local phone exchanges were damaged, said Mark W. Whalen, president and managing director.
FAS 87 unchanged
The Financial Accounting Standard Board has decided not to review current pension accounting rules.
Although a FASB advisory committee discussed the matter, "there was not overall support for changing pension accounting," said Sheryl Thompson, spokeswoman.
Current concerns over pension accounting rules are prompted by the stock market's decline and will dissipate when the market recovers, the advisory council decided.
2 drop Morgan Fleming
The $17.1 billion Connecticut Retirement Plans & Trust Funds and the $26 billion MassPRIM Board terminated J.P. Morgan Fleming Asset Management in separate moves.
The firm managed $1.35 billion in passive enhanced domestic equities and $680 million in core-plus domestic fixed income for Connecticut; the termination was performance related, said Bernard Kavaler, spokesman.
J.P. Morgan Fleming ran $385 million in active domestic large-cap core equities for MassPRIM. Stan Mavromates, senior investment officer, cited personnel turnover and below-benchmark performance as reasons for the termination.
J.P. Morgan Fleming officials are sorry to lose the business and are "taking appropriate steps to turn this performance around," said Alex Trower, spokeswoman.
CalSTRS rehires Milliman
CalSTRS' board approved rehiring Milliman USA as the pension fund's consulting actuary for the next three years. The $91 billion CalSTRS also plans to hire an independent actuary to audit Milliman's work, but any RFP would not be issued until late 2003 at the earliest, said Sherry Reser, spokeswoman.
Separately, CalSTRS' investment committee postponed a vote on issuing an RFP for a real estate consultant while staff reviews issues on separating consulting from performance measurement. Pension Consulting Alliance is the incumbent.
IBM boosts contribution
IBM plans to fully fund its $40 billion U.S. pension plan by the end of the year by contributing $3 billion, probably half in cash and half in company stock, said John R. Joyce, CFO.
Officials earlier had said IBM would contribute $1.5 billion to the pension fund over the next three years, but thanks to an improving stock market, the pension fund reduced the funding gap to $3 billion from $4.5 billion, Mr. Joyce said.
Maryland mulls formal policy
The $25 billion Maryland State Retirement System may create a formal policy for investing in minority and emerging managers. The idea resulted from the system's recent termination of Progress Investment Management and the earlier souring of a relationship with Baltimore businessman Nathan A. Chapman Jr.
The system has five other minority or emerging managers running a total of $719 million.
Also, trustees will decide Dec. 17 whether to retain current actuarial consultant Milliman USA or search for a new actuary.
Ford pension liabilities fall
Ford Motor announced its U.S. pension liabilities have been reduced by about $1 billion, to $5 billion, thanks to improving equity markets, confirmed Marcey Evans, company spokeswoman.
Boyce Thompson shifts assets
Boyce Thompson Institute for Plant Research hired two managers for its $70 million endowment: North Road will manage $4 million in active international large-cap value equities; Tweedy, Browne will run a $5 million passive MSCI EAFE fund, said John M. Dentes, treasurer.
Funding came from terminating Lazard Freres because of personnel changes; it ran $9 million in active global large-cap value equities, Mr. Dentes said.
Separately, the institute's $15 million defined benefit plan hired Private Capital Management to run $3 million in active domestic small-cap value equities and North Road to run $2 million in active international large-cap value equities, Mr. Dentes said. It also committed $1 million to a hedge fund run by Pine Grove.
Partial funding came from dropping Lazard Freres' $3 million active global large-cap value equity portfolio; the remainder came from reducing the plan's fixed-income allocation and active domestic large-cap value equities
Salomon Smith Barney advised.
British fund hires for bonds
West Midlands Metropolitan Authorities hired Royal London Asset Management to run œ130 million ($204 million) in U.K. non-government bonds, said Brian Bailey, council finance director. The hire followed an asset-liability review of the œ4 billion pension plan earlier this year, he said. Funding came from cash. Mercer Human Resource Consulting advised.
IBEW 236 picks SEI
Electrical Workers, IBEW, Local 236 hired SEI Investments to manage $120 million in pension, health and welfare and annuity plan assets, said Bill McDaniel, fund administrator.
