Chicago Public School Teachers Pension & Retirement Fund conferred with representatives of Morgan Stanley Investment Management, MFS Investment, Lehman Brothers Asset Management and UBS Global Asset Management over their lack of compliance with the $10.8 billion fund's minority-owned and women-owned brokerage policy, said Kevin Huber, CFO and acting executive director.
Morgan Stanley and MFS manage $649 million and $440 million for the fund, respectively, in active international developed markets equities; Lehman runs $414 million in enhanced indexed fixed income; and UBS runs $332 million in active domestic value equities. Based on the board's policy, for the 2004 reporting period, the four managers had been required to mandate 25% of the value of trading for international equity and fixed-income portfolios and 50% for domestic equity portfolios to minority-owned and women-owned firms. The firms "had no valid reason" for not complying, and not doing so could mean a reduction in their assignments or termination, depending on performance and other factors, Mr. Huber said.
The managers assured the board they would comply with the policy for 2005, he said.
At UBS, Peter Casey, associate director-corporate communications, said, "We regret that we did not meet the board's increased target. We had met lower targets in each of the prior six years. We have already enhanced our process to address their concerns under the mandate of best execution."
At Morgan Stanley, Chad Peterson, executive director-media relations, said, "We make every effort to comply with their investment guidelines." He declined to elaborate.
At MFS, spokesman John Riley said, "It's our policy not to comment on client matters."
Lehman client contact Alexander Knowles didn't respond to calls for comment.