CalPERS opposes switch
The CalPERS board of administration on Feb. 16 voted to oppose legislation that calls for a constitutional amendment shifting the state's public pension plans to defined contribution from defined benefit. The two bills, which would affect newly hired public employees, would go into effect July 1, 2007. If either bill passes, voter approval during the next statewide election would be necessary.
Wall Street's Lazard Ltd. closed its $294 million defined benefit plan to new employees as of Jan. 31, according to a filing with the SEC relating to its planned initial public offering. The company will now provide a 4% match in its 401(k) plan; there had been no company match. Lazard also plans to cut costs by $100 million a year by reducing employee compensation and making staff cuts. Rich Silverman, a Lazard spokesman, declined to comment, citing the quiet period before the IPO.
The American Benefits Council on Feb. 17 released its own pension plan reform proposal, calling on Congress and the Bush administration to make permanent the long-term investment-grade corporate bond rate now used to calculate pension liabilities. The proposal also calls for clarification of the legal status of cash balance plans, opposes the "mark-to-market" approach that would value assets on a spot basis, and requires that plan sponsors report the funded status of plans no later than 2 1/2 months after the end of each year.
James A. Klein, president of the organization representing corporate plan sponsors, wants to reverse the trend of corporations closing their defined benefit plans by alleviating the uncertainty around hybrid pension plans.
Paul F. Roye, director of the SEC's division of investment management, formally announced he plans to leave in the coming weeks. No information was given on his plans.
Rumors of Mr. Roye's departure circulated in Washington for many months.
The SEC has not named a replacement, but Chairman William Donaldson, who had been informed of Mr. Roye's decision to leave nearly a year ago, may already have a shortlist of people to pick from, said an SEC spokesman.
Illinois fund hires 1, drops 1
The $34 billion Teachers' Retirement System of the State of Illinois hired Western Asset Management to manage $400 million in TIPS. Funding will come from reducing domestic fixed-income index funds run by State Street Global Advisors and Northern Trust Global Investments; further details were not available.
Separately, Capital Guardian was terminated as manager of a $679 million active international equity account for poor performance. The assets will go to an EAFE index fund managed by SSgA. Chuck Freadhoff, a Capital Guardian spokesman, said the company does not discuss its clients.
In accordance with investment policy, two managers were placed on watch when performance fell below established minimums: Ariel Capital, which manages $349 million in active domestic small-cap value; and Boston Partners, $741 million in active domestic large-cap value. Four other managers remain on watch.
The $78 million City of Pensacola (Fla.) Firefighters Relief & Pension Plan will terminate Northern Trust, which runs $11 million in a Russell 1000 Growth index fund, for performance, said Cheryl Jackson, city administrative officer. The money will be distributed among its active domestic large-cap growth, large-cap value and fixed-income portfolios.
Christine Harmon, Northern Trust spokeswoman, said no one at the firm could comment.
The plan also will terminate J.&W. Seligman, which ran $4 million in its Seligman Capital mutual fund, because of underperformance and a fee increase, Ms. Jackson said. Consultant Merrill Lynch is compiling a shortlist of mutual fund and separate account managers, and the board will discuss possible replacements at its quarterly meeting in May.
Seligman spokesman Hank Green said the firm does not comment on client matters.
Brascan Corp., a Toronto-based asset management firm, is buying Hyperion Capital, which manages $6 billion in real estate mortgage-backed securities and $7 billion in traditional fixed income for institutional investors. Terms were not disclosed.
The purchase will add mortgage-based securities to complement Brascan's real estate investment management and its core fixed-income mutual fund and structured strategies for U.S. institutions.
BB&T Corp. will acquire a 70% stake in privately held Sterling Capital Management, which has about $8 billion in assets under management, said Kenneth R. Cotner, COO of Sterling. Sterling's five managing directors will continue to lead the firm, which will keep its name and operate as an independently managed subsidiary of BB&T. The firms aren't disclosing terms of the deal.
BB&T Asset Management has roughly $16 billion in assets under management.
Three Ohio state pension plans were named lead plaintiffs in a federal class-action lawsuit to recover up to $75 million in shareholder losses from American International Group.
The pension funds claim the losses were incurred as a result of the insurance giant being charged with accounting fraud and insurance bid-rigging.
The plans are the $60 billion Ohio Public Employees Retirement System, the $53 billion State Teachers Retirement System of Ohio, and the $9 billion Ohio Police & Fire Pension fund.
Joseph Norton, an AIG spokesman, said, "As a matter of policy, AIG does not comment on legal issues."
G. Michael "Mickey" Miller will become CFO of Jacksonville, Fla., effective April 11. He will manage the city's pension division, overseeing a combined $2.5 billion in assets, said Kristen Key, spokeswoman for Mayor John Peyton's office. Mr. Miller will replace Walt Bussels, who retired several months ago, Ms. Key said.
Mr. Miller has been CFO of the city of Orlando for the past 25 years; his replacement hasn't been named.
The $3.2 billion San Diego City Employees' Retirement System will consider on March 18 a request by the San Diego Unified Port Authority for a separate trust and board to manage the authority's pension assets, said Paul Barnett, assistant retirement administrator. Employees of the port authority currently participate in the city employees' plan. the port authority also wants to amend an agreement between the authority and the pension system to include the right to terminate the relationship. The port authority's pension assets were valued at $123.8 million last year.
