SACRAMENTO, Calif. — The CalPERS board on Aug. 15 approved a policy allowing investments in international pooled real estate funds that have up to 25% of assets in countries excluded from the fund's permissible country list, including China and Eastern European countries. The $197.5 billion California Public Employees' Retirement System is considering putting $650 million in such pools. Board members approved the policy despite concerns over whether such funds abide by international labor standards.
WASHINGTON — The Federal Trade Commission and the Justice Department's antitrust division will not halt the proposed trade of Citigroup's asset management unit and Legg Mason's brokerage arm, according to the FTC website. The agencies determined that the deal, announced in June, does not violate U.S. antitrust laws. The swap would double Legg Mason's assets under management to $830 billion and would add 1,300 brokers to Citigroup. The transaction is valued at $3.7 billion.
NEW YORK — Asset management firms generated higher levels of profits in 2004 than in any of the previous three years, according to a new survey from strategic consulting firm McKinsey & Co. Profit levels have been "remarkably" consistent over the four-year period — ranging from a low of 25% in 2002 to a high of 28% last year — but maintaining that stability will become increasingly difficult. Also, growth in the asset management industry slowed in the past year, and net new flows increased by only 2%, according to the report. These trends indicate the industry "is making a fundamental bet that market appreciation, not new flow growth, will drive future profitability; if that appreciation doesn't materialize, it is unlikely that significant profit growth will materialize, given today's rate of new flow growth," according to the report.
SPRINGFIELD, Ill. — The Illinois Teachers' Retirement System's board of trustees on Aug. 12 agreed in principle to adopt four changes to its investment policy, related to fiduciary responsibility. The $34 billion pension fund plans to ban payment of placement, marketing or finder's fees across all asset classes; require legal approval of all partnership documents prior to board approval; develop guidelines defining the circumstances under which trustees may meet privately with prospective investment managers; and expand disclosure of third-party fees. The board will likely vote on the changes at its Nov. 3-4 meeting.
SPRINGFIELD, Mass. — Babson Capital Management and Norfolk Management Group created a joint venture, Wood Creek Capital Management, to incubate "emerging hedge funds in non-traditional asset classes," the companies announced Aug. 15. The joint venture's first fund, Wood Creek Venture Fund, will invest in alternatives managers in niche strategies, such as intellectual property rights and trade-finance obligations, said Steve Staggs, a managing director responsible for Babson's alternative investment efforts. Brett D. Hellerman, Norfolk's CEO, will also serve as CEO of Wood Creek Capital Management.
BOSTON — Median returns for 486 funds in the Russell/Mellon Analytical Services universes were positive in the second quarter, according to a quarterly Mercer Investment Consulting survey. The median return for public pension plans was 2.4% for the quarter, vs. a median of 2.2% for the median corporate pension plan and the median foundation and endowment, according to Mercer's summary. Public plans posted median gains of 1.5% for the year to date through June 30, while corporate plans earned 1.3% and foundations and endowments, 1.1%.