WASHINGTON - Steven A. Kandarian, executive director of the Pension Benefit Guaranty Corp., warned the agency's shortfall has grown to about $5.4 billion - the largest ever - from $3.6 billion as of Sept. 30. Speaking April 30 before the House Select Revenue Measures Subcommittee, Mr. Kandarian said continued failures of companies in the airlines and automotive industries could further increase the deficit. Airlines now represent $26 billion of total pension underfunding, while firms related to the automotive industry have a collective deficit exceeding $60 billion, Mr. Kandarian said.
Also at the hearing, Peter R. Fisher, Treasury undersecretary, said plan sponsors should continue using a higher interest rate for calculating pension liabilities for two more years, giving the Bush administration and lawmakers more time to come up with a replacement for the 30-year Treasury bond. Mr. Fisher said lawmakers need to act quickly on this extension to give companies enough time to plan their pension funding requirements for 2004. The temporary law, which expires at year-end, allows plan sponsors to base their pension liabilities on 120% of the interest rate on the 30-year Treasury bond.
Boston Private to get 80% stake in Dalton, Greiner
BOSTON - Boston Private Financial Holdings signed an agreement to buy 80% of value equity manager Dalton, Greiner, Hartman, Maher. The remaining 20% of Dalton, Greiner will be kept by that firm's management team, according to news releases from both companies. Boston Private agreed to pay $75 million up front, with a final price to be determined by various factors. The transaction is expected to close in the third quarter.
Dalton, Greiner manages $2.2 billion in institutional assets. Boston Private, through various subsidiaries, manages $6.8 billion, largely for high-net-worth individuals but also for some institutions.
Fidelity Institutional tabs Carey as president
BOSTON - William C. Carey is the new president of Fidelity Institutional Retirement Services Co., Fidelity's 401(k) plan business. He succeeds Joseph P. LoRusso, who was named president of Fidelity Investments Institutional Services Co. last year. Mr. Carey had been executive vice president of Fidelity's emerging corporate market group. Robert Hunter will head up Fidelity's emerging corporate market group on an interim basis until a permanent replacement is named.
Ohio Public puts 2 on watch, drops Nicholas-Applegate
COLUMBUS, Ohio - Ohio Public Employees' Retirement System, Columbus, terminated active international equity manager Nicholas-Applegate, which ran $300 million in large-cap growth and $21 million in small-cap growth, because of "organizational issues, staffing and a downturn in relative performance," Farouki Majeed, deputy director of investments for the $47 billion fund, said in a news release. Nicholas-Applegate officials did not return calls seeking comment. The money will be divided among existing international equity managers; Mr. Majeed did not provide further information.
Separately, two active international equity managers were put on watch for performance: TT International, which runs $300 million; and Marvin & Palmer, which handles $400 million, Mr. Majeed said. Stephen J. Gannon, senior vice president and director of marketing at Marvin & Palmer, said the firm was aware of the listing but declined further comment. Officials at TT International were unavailable for comment by press time.
LACERA settles actuary breach of contract suit
PASEDENA, Calif. - Los Angeles County Employees Retirement Association settled its negligence and breach of contract lawsuit against Towers Perrin, Forster & Crosby and two Towers Perrin actuaries, John King and David LeSueur, said Gregg Rademacher, assistant executive officer of the $24 billion system. The complaint was filed January 2001 in Los Angeles County Superior Court, Mr. Rademacher said.
Mr. Rademacher and Stanley Davis, Towers Perrin spokesman, both said the matter has been "satisfactorily resolved." Neither would elaborate on the terms of the settlement.
Wilshire survey: S&P 500 plans' liabilities surpass $1 trillion
SANTA MONICA, Calif. - A Wilshire survey of S&P 500 corporate pension plans showed liabilities increased by $105 billion in 2002 to just more than $1 trillion, the "worst year ever" for corporate plans - 89% are underfunded. S&P 500 companies' defined benefit assets fell by $106 billion to $892 billion, lowering their funding ratio to 83% from 104% in 2001; the plans had a cumulative deficit of $177 billion as of Dec. 31, from a $34 billion surplus a year earlier, according to Wilshire.
Falling interest rates throughout the year contributed to the dramatic increase in liabilities. The median discount rate used to value liabilities dropped from 7.25% to 6.75%, according to Wilshire. S&P 500 companies' contributions to their defined benefit plans increased nearly fourfold to $41 billion, from $12 billion in 2001, with further increases expected, Wilshire said.
Lend Lease sells 3 businesses to GMAC Institutional
NEW YORK - Lend Lease Corp. agreed to sell three of its U.S. debt businesses to GMAC Institutional Investors for around $106 million, Lend Lease officials announced April 28. The units are: CapMark Services, a commercial mortgage loan servicing business; the Debt Advisory Group, which manages CMBS and mortgages for institutional investors; and North American Asset Management, a distressed debt business.