Verizon Investment Management Corp., which manages the retirement assets of Verizon Communications Inc., New York, will probably absorb the investment management functions of MCI Inc.'s $396 million defined benefit plan once the two companies merge, speculated one money manager familiar with Verizon, who declined to be identified. "Verizon has much bigger retirement plans and an entire office dedicated to managing those assets. I'd have to believe they'd take over," said the executive, who pointed out that he has not spoken to officials at Verizon since it announced its agreement to acquire MCI for $6.8 billion in cash and stock.
William F. Heitmann, president of Verizon Investment Management, said it is logical to speculate that Verizon would take over management of MCI's defined benefit assets, but no decision has been made. "When the merger closes, we'll set up working committees and examine the best integration plan. MCI has relatively little in the way of pension assets compared to us, so it's fair to say that it probably will be integrated into ours. We'll take a look at all of the managers (of both plans) in terms of performance and how they fit into the asset allocation scheme. I don't know if there's going to be any shakeout; it's really too early to say right now."
Calls to Stephen R. Mooney, a vice president and head of pension plan management at MCI, were not returned.
Verizon oversees a $35 billion pension plan and a $16 billion 401(k) plan. MCI, Ashburn, Va., has a $1.2 billion 401(k) plan in addition to its defined benefit assets, according to its most recent annual report. Mr. Heitmann said it has not yet been decided whether the 401(k) plans would be merged. "We would look at the overall benefit design and see where we should go once the merger happens."
Fidelity Investments is bundled provider for Verizon's 401(k) plan, and Merrill Lynch Investment Managers is bundled provider for MCI's 401(k) plan, according to the Money Market Directory.
Verizon has 293 external managers running its pension assets; the asset allocation is 39% domestic equity, 22% international equity, 14% fixed income, 13% alternatives, 6% international fixed income, 4% real estate and 2% cash, according to Pensions & Investments' most recent directory of the 1,000 largest pension funds. MCI has seven external managers running its assets, and the asset allocation is 42% domestic equity, 27% fixed income, 22% international equities and 9% passive equity and fixed income, according to the MMD. Neither company uses an external investment consultant.
