As the administrator of the Government Employees' Retirement System for the Government of the United States Virgin Islands, I am an avid reader of your publication. For years I have admired the straightforward, concise manner in which your articles are prepared and the substance of the important investments issues presented in Pensions & Investments.
I was somewhat disappointed that the Government Employees' Retirement System was not accurately reported/ranked in the Top Pension Funds/Sponsors (P&I, Jan. 20). It appears a more accurate ranking report would have placed the retirement system in the position of 647, insofar that our plan assets were valued at $1.001 billion as of Sept. 30, 2002.
This matter is brought to your attention because your publication is so widely read and respected in the investment world. I merely wish the proper ranking of our fund is given the public recognition that is the accurate reflection of our true value.
Laurence E. Bryan
Employees' Retirement System,
Government of the Virgin Islands
St. Thomas, Virgin Islands
Managing currency risks
Your Feb. 3 page-one article "European funds seek boost from currency management" implied that the falling dollar was increasing European interest in currency management, but cooling U.S. interest. U.S. interest in active currency management is not diminishing; during 2002, our increased funding from 19 U.S.-dollar clients totaled $3 billion.
Last year, unhedged MSCI EAFE returns were -19.3%. Hedged international returns plunged 33.9%; the windfall 14.6% foreign currency gain saved almost half the loss. That currency gain could as easily have been extra loss (it was for euro-based funds invested in U.S. assets). That is why active currency management is growing rapidly.
The Russell/Mellon universe data for currency managers (covering some $108 billion) showed a median value-added of 1.2% last year and 1.1% per annum for the last seven years. The value-added was achieved while reducing an unmanaged currency risk - and without additional fund capital. Positive value added last year (a strong 1.98% for the U.S. public fund you mentioned) was welcome. Funds face prospective single-digit equity returns. So the incremental return from active currency management is an attractive way to diminish both funding risk - and the funding gap. All large funds should seek a boost from currency management!
chief research officer
AIMR rule needs reform
We are writing in response to Barry B. Burr's editorial from Feb. 3 (AIMR lagging leadership).
Mr. Burr's insights are quite valid and it's surprising that AIMR hasn't addressed this sooner, as it has been brought up in the past.
The notion that a verifier that helps a client become compliant, can then be independent when they come back in to do the verification, is quite a stretch.
We have always advocated that the two parties should be separate to insure independence. We were pleased to read that AIMR's president, Thomas Bowman, has agreed to investigate.
Hopefully, he will agree that mandated separation of these parties is needed, just as we now realize in other aspects of accounting.
The Spaulding Group
Fort Lauderdale, Fla.