Companies make contributions to pension funds

Several corporations announced recent contributions to their pension funds.

• International Business Machines Corp., White Plains, N.Y., expects to contribute between $430 million and $583 million to its non-U.S. pension plans before the end of the year, according to its third-quarter report filed Oct. 25. The company, which had about $41 billion in defined benefit assets, is required to make a minimum contribution of $389 million, according to the filing. IBM already contributed $430 million to its non-U.S. defined contribution plans in the first nine months of 2005. Additionally, IBM contributed $1.7 billion to its U.S. defined benefit plan in January.

• Continental Airlines Inc., Houston, contributed $65 million in cash in October to its pension plans, which have $1.3 billion in assets. The company has contributed $304 million to the plans through Oct. 18 and met its pension contribution requirements for this year, according to the company's quarterly 10-Q report filed with the SEC. It also contributed $130 million in shares of ExpressJet Airlines to the plans this year.

• American Airlines Inc., Fort Worth, Texas, contributed $22 million to its $6.9 billion pension plans on Oct. 14, bringing its total contributions this year to $310 million, according to a news release. The company does not plan to make additional contributions this year.

• United Technologies Corp., Hartford, Conn., made $200 million in voluntary contributions to its $12 billion pension plan in the third quarter, according to the company's 8-K filing.

CHATTANOOGA, Tenn. — Plumbers and Steamfitters, Local 43, Chattanooga, might interview firms early next year to potentially replace Investment Performance Services as investment consultant for the union's $81 million pension plan, according to Jim Collins, business manager and financial secretary.

"The last two years were reasonable" with respect to overall investment performance, but plan officials "have expressed our concerns" in recent years that returns could be higher, he said.

Trustees are more likely to conduct a shortlist search than issue an RFP, according to Mr. Collins. Plan actuary Brennan & Associates is assisting.

Mitch Green, the Investment Performance Services consultant who works with the plan, declined to comment.

TRENTON, N.J. — Professional Firefighters Association of New Jersey sued the state of New Jersey, state Treasurer John McCormac and the state Senate and General Assembly, seeking to overturn a 2003 law that allowed municipalities to lower their contributions to the $16.4 billion Police and Firemen's Retirement System of New Jersey, Trenton.

The lawsuit, filed in New Jersey state court Oct. 4, also seeks to force the state to make "regular, full payments" to the pension plan for fiscal years 2004 and 2005 "and beyond, in accordance with fiscally responsible actuarial calculations," according to a statement on the association's website. The suit, filed earlier this month, also seeks to limit the state treasurer's ability to determine municipal contributions "aside from statutory law."

The police and firefighters' pension fund was 105.65% funded in fiscal year 2000, but that had dropped to 83.95% by the end of fiscal year 2004, when it had a deficit of $3.6 billion, according to the association's statement.

Tom Vincz, a spokesman for Mr. McCormac, declined to comment. Thomas P. Canzanella, president of the association, was not available for comment.

WEST DES MOINES, Iowa — West Bancorporation plans to acquire Investors Management Group, a wholly owned subsidiary of AMCORE, said Katy Mackay, director of marketing. Financial terms were not disclosed. West Bancorporation provides asset management services through subsidiary VMF Capital, an equity asset management firm with $900 million in assets. IMG, a fixed-income manager, brings more than $3.8 billion in assets.

The deal is expected to provide West Bancorporation an additional source of fee income, Thomas Stanberry, chairman, president and CEO, said in a news release.

The acquisition is expected to close late in the fourth quarter.

PINELLAS PARK, Fla. — Pinellas Park Police Officers' Pension Fund named Smith Barney, Dahab Associates and incumbent Merrill Lynch as finalists in the $26 million plan's search for an investment consultant, according to Denise Cowdrick, pension specialist. The board isn't unhappy with Merrill Lynch's performance, but the trustees "believed it was their fiduciary responsibility" to see what other options are available to them, Ms. Cowdrick said. Merrill Lynch has been consultant to the $26 million plan since 1995.

The board will likely schedule final presentations for the week before Thanksgiving, although a date hasn't been set, Ms. Cowdrick said, noting the board will probably make a selection the same day.

PEMBROKE PINES, Fla. — The Pembroke Pines Fire and Police Retirement System might hire managers to run about $20 million in up to four styles of real estate, said Karen Warner, plan administrator. The roughly $200 million plan issued an RFP in July for one manager to run the entire amount, but on Oct. 20 the board and consultant Dahab Associates discussed possibly increasing diversification by choosing up to four managers from the proposals already received. Dahab made a presentation on core real estate at the meeting, but plan officials and Dahab are also considering other real estate investments.

A list of finalists is not yet "set in stone," but manager presentations will probably be scheduled for the board's Nov. 17 meeting, Ms. Warner said.

BROOKFIELD, Wis. — About 89% of employers have at least one written investment policy statement, according to a report from the International Foundation of Employee Benefits Plans. The report collected information from 166 participants in U.S. single employer, multiemployer and public employer defined benefit and defined contribution and summarizes the most popular components of their plans' investment policy statements.

More than half of respondents — 55% — have a written investment policy statement for their defined benefit pension plans, while 38% have a statement from their 401(k) plans. Also, 90% of defined benefit plan policy statements include asset mix targets and ranges.

CHICAGO — Turnaround and corporate renewal professionals need to know the true values of pension assets and liabilities when dealing with companies that are restructuring or under bankruptcy protection, James Gerber, CFO of the PBGC, said Oct. 21 at the Turnaround Management Association's convention in Chicago. The smoothing of assets and liabilities "is one of those issues that can obscure where your plan really is," Mr. Gerber said.

Gary Ford, a partner in the Groom Law Group and a panel member, suggested options for companies to continue their defined benefit plans outside of bankruptcy, including merging a pension plan with an overfunded plan and selling a subsidiary to fund the plan.

ST. LOUIS — Metropolitan St. Louis Sewer District Deferred Compensation Plan might search for a bundled provider for the $20 million plan before year's end, according to Karl Tyminski, district secretary-treasurer. He said plan officials are not dissatisfied with incumbent Vanguard Group's performance, but the officials are "exploring various options" to see what else is available. The board has not decided whether to issue an RFP or ask consultant New England Pension Consultants to assist with a shortlist search, according to Mr. Tyminski. The board should have a clearer plan of action by mid-November, he added. The plan offers 13 investment options.

LONDON — Aberdeen Asset Management will split its private equity subsidiary to better focus on small and midsized markets, according to a news release. The new division, renamed Managers Private Equity, will consist of two teams. Francesco Santinon will lead one team, which will concentrate on transactions valued from £10 million to £50 million. Bill Nixon will lead the growth capital team, which provides funding for companies valued at up to £10 million. Mr. Santinon was head of the private equity division's Leeds, England, office, and Mr. Nixon was responsible for its Glasgow operation.

Hugh Little, managing director of the rebranded group, could not be reached by press time to comment replacements.

BAKERSFIELD, Calif. — Kern County Employees Retirement Association, Bakersfield, initiated a shortlist search for an active emerging markets equity manager to run about $49 million, according to Anne Holdren, executive director. Incumbent Capital Guardian, which has been on the $2.5 billion pension plan's watchlist since September 2004, will be reconsidered because of recent improved performance.

The board will review the list of candidates at its Nov. 16 meeting and hopes to make a selection as "quickly as reasonably possible, pending the outcome from the shortlist, due diligence visits and contract negotiations," Ms. Holdren said.

Chuck Freadhoff, a spokesman for Capital Guardian parent Capital Group, said the firm's policy precludes any comment on client matters.

Wilshire Associates is assisting.

WASHINGTON — Institutional Shareholder Services should end its conflict of interest on consulting to corporate clients while at the same time recommending how institutional shareholders should vote on corporate governance policies, said Ira M. Millstein, partner at law firm Weil, Gotshal & Manges, at the ISS Conference Oct. 19 in Washington.

"Anyone who can't see there are conflicts between consulting and standard-setting has terrible eyesight. Conflicts cause you to bias your judgment in favor of profit-making, not in favor of your basic service," he said.

Mr. Millstein also called for ISS to operate as a non-profit organization owned by its institutional investor clients, which would raise its credibility with corporations.

"Standard-setting ought to revolve around only things that impact performance. I don't think performance should be stock market performance" but return on income, return on equity, cash flow or economic value added, he suggested.

In response, ISS CEO John Connolly said, "Consulting is a misnomer. If I believe that model is flawed, we would exit that part of the business." Consulting accounts for only 15% of ISS revenues, he said, adding that "95% of ISS clients renew their services and are not deterred by perceived conflicts. ... Everything we have done we have done in the interest of institutional investors. ISS has no conflicts."

BRUSSELS — The European Commission on Oct. 20 proposed legislation that would allow workers to change jobs within 25 member states without losing key benefits linked to employer-sponsored pension plans, according to a news release.

"At the moment, if you work somewhere for six years and you leave to work somewhere else, your pension is worth less than a person who works at the same place for six years and continues with the same company until retirement," EC spokeswoman Katharina von Schnurbein said. "This is what we want to avoid; we want portability without the loss of benefits."

The initiatives, scheduled to take effect July 1, 2008, cover mandatory employer-provided pension plans in countries such as the Netherlands, Germany and Austria among others. The new rules require approval by the European Parliament.

PASADENA, Calif. — Los Angeles County Employees Retirement Association gave Pathway Capital Management, the $32 billion system's private equity consultant, full discretion to select international private equity funds, said Lisa Mazzocco, chief investment officer. The fund has an overall 7% target for private equity, with $1.7 billion invested. LACERA's international private equity target is 10% to 35% of the private equity portfolio; so far, 14.1% of the portfolio is committed to non-U.S. private equity, said Christopher J. Wagner, senior investment officer, alternative assets.

NEW YORK — Global money managers do not have a good outlook on U.S. stocks, according to a new Merrill Lynch survey of 311 global fund managers handling $1 trillion in assets.

Fifty-seven percent of respondents said they favor stocks in Japan and Europe, with 47% saying stocks in Japan look best. Only 11% of the fund managers said they favor U.S. stocks.

David Bowers, Merrill's chief global investment strategist, said fund managers in general think U.S. stocks are the most overvalued in the world, with the least favorable outlook for profits.

EL PASO, Texas — The City of El Paso is likely to issue an RFP toward the end of this year or early 2006 for an investment bank to underwrite a potential $200 million pension obligation bond offering, according to William Studer, assistant city manager.

The proceeds would go toward improving the funding status of the city's $570 million police and fire pension fund, which is underfunded by about $250 million.

"If we do a POB, the earliest it would be is in the first quarter" of 2006, Mr. Studer said. Mayor John Cook said in an interview that he would like any RFP to include potential funding for the city's capital projects.

"My preference would be that we issue a hybrid RFQ-RFP, asking some of the major people in the industry to come and look at all of our debt — capital improvements we have planned, what we should do about our existing debt and unfunded pension liabilities," Mr. Cook said.

Final decisions rest with the city council.

NEW YORK — Bank of New York agreed to acquire 80% of Alcentra Group, a London-based subinvestment-grade debt manager, by year end, said Steven Pisarkiewicz, executive vice president and head of BNY Asset Management. Terms were not disclosed. Alcentra has $6.2 billion in assets under management in 15 funds.

Mr. Pisarkiewicz said the deal will provide BNY with a "non-traditional slice" of the fixed-income pie. He said it's part of the firm's strategy to increase its alternative investment offerings, which currently include Ivy Asset Management, its $15 billion hedge fund-of-funds subsidiary.

Alcentra's management, led by Christopher Damico, group CEO; Stephen Bruce, CIO and head of U.S. operations; and David Forbes-Nixon, CIO and head of European operations, will hold the remaining 20% stake. They will report to Mr. Pisarkiewicz.

NEW YORK — Legg Mason and Citigroup set a target date of Dec. 1 to close the swap of Legg Mason's brokerage group for Citigroup's asset management unit, said Mary Athridge, Citigroup spokeswoman. The deal was projected to have a soft close on Nov. 1, but Citigroup's mutual fund shareholders still must approve the transfer of all their funds to Legg Mason, Ms. Athridge said.

DES MOINES, Iowa — Iowa Public Employees' Retirement System canceled its search for a general retainer consultant after issuing an RFP in April.

According to a statement from the $19.3 billion system, the search will resume when: "publicly available information indicates that any and all (SEC) enforcement actions against investment consulting firms have occurred" as a result of the SEC report on consultants issued earlier this year; when Iowa PERS "determines that organizational, service or fee issues with (incumbent) Wilshire Associates necessitate a rebid of the current contract"; or in June 2007, to provide sufficient time for completion of a search before Wilshire's contract expires Sept. 30, 2008.

The system suspended the search in June to see if the SEC would release more information. "With no additional public and company-specific SEC findings information available as of September 2005, and with the approaching expiration of the consultant proposals received in response to the RFP, cancellation of the search was appropriate," the statement said.

The board placed Wilshire on watch in February 2004 for concern about leadership changes and research capabilities.

SANTA BARBARA, Calif. — Santa Barbara County Employees' Retirement System will be moving into alternative investment and real return strategies and away from public market investments, said Oscar Peters, retirement administrator of the $1.6 billion fund. System investment consultant Pension Consulting Alliance will be providing education and potential allocation recommendations over the coming six months.

NASHVILLE, Tenn. — The Western Conference of Teamsters Pension Trust Fund is making a decision on an initial investment in an actively managed or enhanced Russell 3000 index portfolio, according to money management officials familiar with the $27 billion fund.

One money manager, who wished to remain anonymous, said fund officials are considering moving an undetermined portion of the plan's $14 billion domestic equity portfolio to reduce management fees, and the fund is already interviewing candidates.

Calls to the fund were referred to its consultant, Alan Biller at Alan D. Biller & Associates, who did not return calls by press time.

NEW YORK — Buyout and mezzanine fund-raising slowed significantly in the third quarter, with 45 funds raising $16.8 billion, compared with 53 funds raising $23 billion in the previous quarter, according to Thomson Venture Economics and the National Venture Capital Association. However, more capital was committed than in the third quarter 2004, when 44 funds raised $14 billion.

In venture capital, 45 funds raised $5.4 billion in the third quarter, down from 53 funds raising $6.5 billion in the second quarter and 54 funds raising $4.8 billion in the third quarter 2004.

NEW YORK — The American Stock Exchange on Oct. 17 filed a proposal with the SEC for a hybrid market that will offer participants automated execution and access to the exchange's open outcry auction market, confirmed Antoine Shagoury, AMEX chief information officer. The exchange would be ready to implement its hybrid when new SEC market structure regulations take effect in June 2006, Mr. Shagoury said.

"AMEX has a very solid offering and I think we can be very competitive," he said. "I think this is a different mousetrap, a better mousetrap."

The New York Stock Exchange also has filed a hybrid market proposal with the SEC.

COLUMBIA, Mo. — MFA Oil Co. is considering investing roughly $10 million in a domestic small-cap to midcap equity fund for its $100 million pension plan, said Carol Winkler, plan administrator. Plan officials will consider both active and passive products to further diversify the overall portfolio, she said. Funding would come from a general rebalancing, and no manager would be terminated. Consultant Hewitt Associates will bring a shortlist of candidates to the November investment committee meeting, for which a date has not yet been set.

NEW YORK — Pzena Investment Management will begin marketing concentrated deep value international and global strategies to institutional clients in early 2006, said Bill Lipsey, the New York-based firm's marketing and client service chief. Those strategies — which call for an international portfolio of 30 to 50 midcap- to large-cap stocks and a global portfolio of 40 to 60 stocks — will be led by A. Rama Krishna, a 20-year industry veteran who joined Pzena two years ago, Mr. Lipsey said in a telephone interview.

Pzena manages just less than $15 billion as of Sept. 30, up from $10.7 billion at the end of 2004. Assets have risen sharply despite Pzena's large-cap strategy being the only one of its five U.S. value equity strategies that remains open to new money. In anticipation of the new strategies, which Pzena incubated from the start of 2004, four analysts have been added over the past two years, increasing its research lineup to 15 analysts, Mr. Krishna said.

BATON ROUGE, La. — Teachers' Retirement System of Louisiana, Baton Rouge, posted a 10.9% return on its investments for the year ended June 30, according to a statement on the $12.7 billion pension fund's website.

The return increased the system's total assets by $792 million during the year, the statement said. Among the system's investment portfolios, domestic equity, domestic bonds, international equity, global bonds and alternative investments posted returns of 8.2%, 7.9%, 12%, 9.6% and 20.2%, respectively, for the fiscal year.

"The results are a tribute to our board of trustees' strong policy focus that has resulted in a well-diversified portfolio," Director Maureen H. Westgard said in the statement.

WASHINGTON — U.S. retirement plan participation is highest in states stretching from New England through the upper Midwest, topping out at 58% in Minnesota, according to a new Employee Benefit Research Institute study. Connecticut is a close second, with a 57.8% participation rate, followed by Iowa at 55.9%. Warm-weather states such as Florida, Georgia and California reported the lowest participation rates.

NEW YORK — Kohlberg Kravis Roberts closed KKR European Fund II, its second European private equity fund, at s4.5 billion ($5.4 billion), exceeding its initial s1.5 billion target. The $46 billion Oregon Public Employees Retirement Fund, Salem, invested s100 million and the $8.9 billion Los Angeles City Employees Retirement System invested $15 million. KKR executives also invested s100 million.

CAMBRIDGE, Mass. — Babson Capital Management is applying for a license to operate locally in Japan, in response to growing opportunities there, said CEO and President William F. Glavin.

"We've seen increased demand from large, sophisticated Japanese investors for many of our alternative strategies," including LIBOR-based bank loan strategies and CDOs and CLOs, Mr. Glavin said in a telephone interview. "A local license will allow us to capture a larger share of the market." Parent company Massachusetts Mutual Life Insurance's Tokyo-based asset management unit, MassMutual Investment Management, hopes to obtain the license during the first quarter of 2006, said Mr. Glavin.

Currently, Japanese clients set up offshore trusts that hire Babson as an adviser. The amount Babson advises for Japanese clients has quadrupled in the past two years to more than $2 billion, said Arthur Djang, who heads up international insurance investments at Babson. A local license would allow MassMutual Investment Management and Babson to more easily serve Japanese pension funds and other institutional investors, which face some restrictions in hiring non-licensed managers.

A local license would also lift restrictions on how much general account money Babson can advise in any one portfolio at the parent company's local life insurance unit, MassMutual Japan, Mr. Djang said.

NEW YORK — Restricted Stock Partners launched the Restricted Securities Trading Network, a trading service that facilitates the buying and selling of restricted securities of public companies, including stock, warrants and debt, according to Barry E. Silbert, founder and CEO of Restricted Stock Partners.

The network, which began as a pilot program in April, has signed on nearly 150 institutional and retail investors representing more than $50 billion in assets.

Restricted securities, a $1.2 trillion asset class, are issued through private placements, corporate mergers and reorganizations, the exercise of stock options and as compensation.

In addition to matching up buyers and sellers, RSP administers all parts of the transaction including negotiating terms, documentation and processing.

TACOMA, Wash. — Russell Investment Group will use Hotspot FXi LLC, an electronic foreign exchange trading system, as one of its currency trading platforms, according to Ian Battye, Russell's director of currency management. "We are very focused on reducing transaction costs, and the use of platforms such as Hotspot and others is geared toward achieving that both internally and for our clients," Mr. Battye said in an interview. "This is also driven very much by our interest in diversifying our access to liquidity."

He said Russell transacts "well in excess" of $100 billion in foreign exchange per year.

NEW YORK — Dow Jones Indexes on Oct. 19 launched the Dow Jones China Offshore 50 index, confirmed Naomi Kim, spokeswoman. It comprises companies with primary operations in mainland China that trade on the Hong Kong Stock Exchange, New York Stock Exchange, Nasdaq or the American Stock Exchange, she said. The index is weighted by free-float market capitalization and will be reviewed every March and September.

NAPERVILLE, Ill. — Tellabs Inc. officials expect to conclude their search for a bundled provider for the company's $330 million 401(k) plan by the end of November, according to Patricia Elliot, benefits manager at the Naperville, Ill., company. She said company officials will evaluate candidates in November, but she could not comment on which firms are being considered. Hewitt Associates, the current bundled provider, is being reconsidered. The search is not related to Hewitt's performance, Ms. Elliot said, noting that it's "good practice" to explore options, and the company had not searched for a bundled provider in several years.

The company issued an RFP earlier this year. Investment consultant Blue Prairie Group is assisting.

The 401(k) plan currently offers 12 investment options.

SOUTHFIELD, Mich. — WL Ross & Co. and Housing Development Finance Corp., an Indian finance firm, are joining to offer a fund aimed at restructuring and turnarounds of companies in India, said Mr. Ross, founder of the private equity firm.

WL Ross will raise money from U.S.-based institutional investors, Mr. Ross said. He did not say what the fund's targets will be.

JERSEY CITY, N.J. — Thomson TradeWeb launched an online trading platform for DJ CDX and iTraxx credit default swap indexes, according to Jack Mahoney, director of research and marketing at TradeWeb. Liquidity is being provided by eight dealers: JPMorgan, Morgan Stanley, Goldman Sachs, Merrill Lynch, UBS, Barclays, ABN AMRO and Dresdner Kleinwort Wasserstein.