CalSTRS staff proposed setting California's pension contribution to the system at $1 billion for the coming fiscal year, covering both a $448 million normal pension contribution and a $555 million payment to CalSTRS' inflation account, which makes cost-of-living adjustment payments.
Gov. Gray Davis earlier had proposed funding the normal contribution through a pension obligation bond or through a loan from CalSTRS. Mr. Davis had proposed cutting the cost-of-living payment by $500 million; in the event of a shortfall, contributions would be made up through July 1, 2036.
Maryland taps SSgA
The $24.6 billion Maryland State Retirement and Pension System hired SSgA to manage 45% of its assets in three passive portfolios - $8 billion in a Russell 3000 fund, $1 billion in an EAFE fund and $2 billion in a Lehman Aggregate bond fund. Funding will come from internally managed portfolios and from existing managers.
Oklahoma Fire, CSAM to meet
Oklahoma Firefighters' trustees will meet with officials of Credit Suisse Asset Management on April 18 to discuss performance of the $50 million active EAFE equity portfolio CSAM runs for the $1.12 billion pension plan, said Robert Jones, executive director. The firm was put on watch for performance four months ago. Plan officials will decide on further action at the meeting, he said. Asset Consulting Group is advising.
Suzanne Fleming, spokeswoman for Credit Suisse, declined comment.
Hedge funds fall in 4th quarter
Hedge funds experienced a net outflow of $696 million in the fourth quarter, the first drop in assets in more than two years, according to Tremont Advisers' TASS Research unit. Long-short equity sustained the largest loss, a net $2.8 billion, followed by event-driven and global macro strategies. For the year, hedge funds pulled in $16.3 billion, led by event-driven and convertible arbitrage strategies, gaining a net $3.4 billion and $3.2 billion, respectively.
Bad news from Greenwich
U.S. pension funds and endowments lost more than a $1 trillion in assets over the past three years, with the largest decline in value registered in 2002, according to a study of 1,700 funds by Greenwich Associates. Dev Clifford, Greenwich consultant, called the three-year period ended Dec. 31 "probably the most destructive in the whole history of the U.S. fund business."
Corporate pension funds were hit hardest, with an average loss in value of 14.6% last year, compared with a 10.1% loss in 2001.
Illinois eyes pension bonds
Illinois might issue $5 billion to $10 billion in pension obligation bonds, according to a proposal from Gov. Rod R. Blagojevich. The state's outstanding pension obligation is $35 billion.
If the proposal is passed by the General Assembly, the state's contributions to its five pension funds would come from proceeds from the bonds this year and in 2004, instead of from the state's general revenue fund. That would allow the state to cut $1.9 billion from its nearly $5 billion deficit, according to the proposal.
Teachers fund keeps SSgA
The system also put three firms on watch for the first time: PIMCO, which runs $1.5 billion in active domestic fixed income; Morgan Stanley, $687 million in active domestic bonds; and Neuberger Berman, $194 million in active domestic equities.
The action was triggered when the managers' returns fell below a point previously established by fund officials; Neuberger Berman also was put on watch because of organizational concerns.
Ariel Capital, which manages $204 million in active domestic small-cap value equities, was removed from the watch list.
BGI in, SSgA out
The Washington State Investment Board hired BGI to run a $186 million money market option for the system's $2 billion deferred compensation plan, replacing SSgA. The board also retained BlackRock to run a $168 million government money market fund and a $220 million general money market fund. The board also committed $125 million to GTCR Fund VIII; Pacific Corporate Group advised.
Global plans hit hard
The funding levels of European, Japanese, British and American pension plans each dropped at least 20% in 2002, and around 40% cumulatively since Jan. 1, 2000, due to the global downturn in equity markets, according to a new analysis by Towers Perrin. Specifically, the funding levels of U.S. pension plans fell by 20% in 2002, and 39% since Jan. 1, 2000, the report noted.
Plan contribution expected
Union Pacific plans to contribute $75 million this year to its two pension plans, which have a combined $1.8 billion in assets, said a plan official who asked not to be identified. Last year, the company contributed $225 million to the plans, which had $2.48 billion in liabilities as of Dec. 31, she said.
MG combines 19 plans
MG North America Holdings hired Fidelity as bundled provider of its newly consolidated $110 million 401(k) plan, which offers 18 investment options, said Ingrid Krinke, senior vice president-human resources.
The company combined its 19 subsidiary 401(k) plans Jan. 1. It did not use a consultant.
Separately, MG will select a custodian and consultant on March 10 for its new $43 million master trust, a merger of three active and four frozen defined benefit plans for its U.S. subsidiaries, Ms. Krinke said.
J. Sainsbury on March 28 will alter its pension plans, which have a combined 2.6 billion ($4.1 billion) in assets, in order to control underfunding, according to a statement by Peter Davis, group CEO. Sainsbury will replace its traditional final-pay defined benefit plans, which were closed to new members last April, with a stakeholders scheme, and it will open a career-average plan for new employees and those who wish to move from the final-salary plans, said Melanie Cooke, spokeswoman.
Wachovia offering advice
Wachovia Retirement Services is launching a new defined contribution advice service where the money is invested in options selected by Wachovia, not the ones chosen by their plan sponsor, said Joe Ready, senior vice president of Wachovia Retirement Services.
Wachovia is able to select its own menu of 11 investment options, each in separate asset classes, without it constituting a prohibited transaction because it is doing so under the Sun America advisory opinion by the U.S. Department of Labor, Mr. Ready said. Wachovia has hired Morningstar to review, not approve, the 11 investment options it chooses for plan participants, and to provide an asset allocation models.