WHITE PLAINS, N.Y. — A memorial service for hedge fund executive Lawrence Hunt Taylor will be held at 4 p.m. April 2 at the Renaissance Westchester Hotel, White Plains, N.Y. Mr. Hunt was killed in a motorcycle accident on Feb. 5. He is survived by his wife and two children.
Memorial service to be held for Lawrence Hunt Taylor
WASHINGTON — U.S. companies are taking a wait-and-see approach to proposed new rules requiring better disclosure of executive pay programs, but they are likely to change those plans when the rules are adopted, according to a survey by Watson Wyatt Worldwide.
The consulting firm polled 112 compensation and human resource executives at publicly traded companies and found that 70% of companies do not plan to change their compensation programs in response to the SEC's proposal to require increased disclosure of the programs on proxy statements.
"The thing that surprised me was that companies think it won't change their compensation plans and won't improve their corporate governance," Ira Kay, global director of compensation consulting at Watson Wyatt, said in a telephone interview. "We believe the heightened disclosure on severance and pensions will in fact put pressure on companies to rethink these programs."
He added that increased disclosure requirements will raise the level and "quality of discussion" about compensation at corporate board compensation committees, "which in and of itself from a business judgment standpoint is an improvement in corporate governance."
Any changes to severance and pensions stemming from the proposed rules will likely take the form of less generous packages, Mr. Kay said, adding that they could also shake up the executive labor force.
"There is a case to be made that the labor market for executives is quite efficient — that's what we believe," he said. "Putting more constraints and more risk into these executive positions could cause turnover or other performance-types of problems."
If approved, the rules would take effect for 2007 proxy filings.
WASHINGTON — The U.S. Treasury plans to examine the role hedge funds, private equity funds and derivatives play in financial markets, according to Randal K. Quarles, undersecretary of the Treasury for domestic finance.
"Looking forward, the Treasury will be focused on seeking to understand in the most comprehensive way possible whether and how changes in the structure of the financial services industry have affected the way markets operate … whether the growth of certain types of institutions or instruments have materially affected the efficiency with which markets intermediate risk, whether risk is placed or pooled in different ways or different places than it has been in the past — and if so, what appropriate policy responses might be," he said in prepared remarks to the Institute of International Bankers' annual Washington conference March 13.
Treasury officials hope to "understand and stay well ahead" of the risks in financial markets, specifically whether growth in investments like derivatives and hedge funds could alter the level or nature of risk in both markets and financial firms, Mr. Quarles, said.
"For instance, derivatives now serve a key role in our capital markets primarily by increasing efficiency, liquidity and the ability to segregate and distribute risk," he said. "We at Treasury, given the explosion in the type and use of derivatives, and institutions that use them, want to ensure that the magnitude of risk and exposure are properly measured and that investors and market participants have full and adequate disclosure upon which they can make informed decisions."
GRAND RAPIDS, Mich. — Ronald Retsema, former president and trustee of the Rycenga Homes Inc. profit-sharing 401(k) plan, Spring Lake, Mich., will pay more than $1.1 million to the plan, according to a civil ruling Tuesday in a U.S. District Court in Michigan. The court held Mr. Retsema liable for $876,905.57 in assets transferred from the plan to Rycenga Homes between April 1992 and May 2004 and $251,660.48 in lost opportunity costs, which the court determined as what the plan would have earned on the assets.
The judgment resolves a lawsuit filed in May by the Department of Labor. The suit charged that Mr. Retsema violated ERISA by transferring more than $2.5 million from the plan to the business and failing to remit contributions deducted from employees' paychecks to the plan.
ATLANTA — The Department of Labor sued the fiduciaries of Rehab Consultants Inc., Jefferson, Ga., for making improper loan payments from the company's employee stock ownership plan to parent company Rehab Consultants of Florida and then abandoning the plan, according to court documents.
The suit, filed in U.S. District Court in Atlanta, alleges that five plan committee members — Joseph Gentzel, Mary Ann Gentzel, Grayson Gentzel, Jennifer Heidt Gentzel and Graeme Gentzel — violated ERISA by making more than $170,000 in loan payments from the ESOP to RCF. RCI was dissolved in June 2001, and the plan committee members resigned without providing for continued management of the ESOP, allowing the value of the stock to drop to 79 cents per share from $19.74 per share over a two-year period, the suit alleges. Assets of the plan were unavailable at press time.
The suit seeks a court order requiring the defendants to pay back all losses with interest.
NEW YORK — Bristol-Myers Squibb contributed $423 million to its $5.02 billion pension plans in 2005 and expects to contribute an as-yet undetermined amount this year, according to the company's annual report filed March 14 with the SEC.
"Although no minimum contributions will be required, the company plans to make cash contributions to the U.S. pension plans in 2006," according to the report, which added that officials expect to contribute between $70 million and $90 million to its international pension plans, which account for about 20% of overall plan assets.
The 2005 asset allocation for U.S. plans was 68% equities, 25% fixed income and 7% private equity and other investments. Bristol-Myers Squibb stock accounted for less than 1% of assets, according to the report.
The company lowered its expected rate of return for U.S. plan assets to 8.75% for 2005 and 2006, from 9% in 2004.
CHICAGO — The Chicago Public School Teachers' Pension and Retirement Fund is considering a new asset allocation that would almost double its international equities to 22% of the $11 billion fund, up from the current 12.5%. Funding would come from dropping the domestic equity allocation to 44% from 48.5% and fixed income to 23% from 28%. The fund's other allocations would remain the same: real estate, 7%; private equity, 2%; and cash 2%.
Mercer Investment Consulting, the fund's consultant, proposed the allocation in part because the fund's need for liquidity to meet high benefit payments "prevents us from recommending an increase in less liquid strategies such as private equity and hedge funds," according to the Mercer allocation report. The fund has no allocation to hedge funds.
The growth of the unfunded pension liability argues for "maintaining a fairly aggressive (investment) policy," the report states.
The fund's investment committee asked Mercer, which proposed the allocation, to do more modeling.
AUSTIN — Texas Teacher Retirement System will not invest in companies that profit from pornography, according to an investment policy revision approved by the board of trustees.
"TRS will not invest in the debt of a company that derives a significant portion of its revenues from products or services intended exclusively to appeal to a prurient interest in sex," according to the new policy. "These would include, but not be limited to, sexually explicit (X- or NC17-rated) films, videos, publications and software; topless bars and strip clubs; and sexually oriented telephone and Internet services."
Howard Goldman, spokesman for the $96 billion system, said system officials are not aware of any current investments that conflict with the new policy and that staff will develop policies and procedures to ensure compliance with it.
NEW YORK — Citigroup plans to sell roughly 9 million shares of Legg Mason that it acquired last year in exchange for its asset management business, according to a March 10 filing with the SEC. The shares, valued around $125 each, represent almost half of the overall shares that Citigroup acquired from Legg Mason. Citigroup, according to the filing, will hold the remaining 9.7 million Legg Mason shares.
The Legg Mason stock being sold consists of all 5.39 million shares of common stock Citigroup acquired last year as well as 3.61 million shares of preferred stock, according to the filing.
SAN FRANCISCO — PG&E Corp. will make a $249.7 million net pension contribution in 2006 as part of a proposed settlement awaiting approval by the California Public Utilities Commission. Like other costs, pension contributions are reviewed as part of the utility's rate-setting process.
Under the proposal, PG&E also will make net contributions of $153.4 million each year for 2007 through 2009. Those additional contributions will be approved annually, said Claudia Mendoza, a PG&E spokeswoman. The contributions should make the fund fully funded on Jan. 1, 2010, on a projected basis, according to a document filed by PG&E with the utilities commission. The fund, which had $7.8 billion in assets as of Sept, 30, 2005, was 98.6% funded as of Jan. 1, 2005.
The fund's assumed rate of return was increased to 7.5% from 7% as part of the proposed settlement.
SACRAMENTO, Calif. — CalPERS eventually might invest up to $6 billion in commodity futures, its first allocation to the asset class, a staff memo suggests. Officials at the $205 billion California Public Employees' Retirement System, Sacramento, plan to submit a recommendation for a pilot program to the investment committee at its April 17 meeting.
Commodity futures provide significant diversification from equities and bonds and offer positive returns, according to the memo. CalPERS staff forecasts the annual return of 6.5%, while consultant Wilshire Associates Inc. projects a 5.5% annual return. The difference is that CalPERS staff expects Treasury bills will generate an additional one percentage point above inflation.
Staff believes that allocating 3% of total fund assets, taken from both global equities and fixed income, would have no effect on the pension fund's total return while reducing total risk by 31 basis points.
Separately, CalPERS staff is developing a plan to create active currency programs designed to add alpha that would be run by both internal staff and external managers. Staff plans to bring a proposal to the investment committee to create internal capability and to search for external managers in 2007. CalPERS' current currency overlay managers, who invest defensively, would not be affected by any proposed changes.
The fund also is making significant headway in revamping its $10.6 billion alternative investment management program, according to the memo. Staff of the $205 billion California Public Employees' Retirement System and Pension Consulting Alliance are deciding how to deal with its legacy portfolio of non-core underperforming limited partnerships. One option would be to place all of the interests into a separate account managed by a third party; some interests would be allowed to grow while others would be wound down. Another option includes selling the interests in the secondary market.
Staff and PCA also have developed categories for new smaller investments, which could be either funds of funds or separate accounts. They are: domestic emerging managers; international emerging markets; California investments; clean energy and technology; middle-market private equity; and venture capital. General partners would be hired for each vehicle.
In addition, staff plans to seek greater investment discretion for new projects and co-investments at the April 17 investment committee meeting. Staff plans to propose changes to the alternatives benchmark at that meeting.
WASHINGTON — The Bush administration will likely veto any pension reform legislation that gives airlines extra time to shore up their underfunded pension plans, said Mark Warshawsky, assistant treasury secretary.
"It is obvious that allowing underfunded plan sponsors to negotiate a separate regime of weaker funding rules will weaken the incentives for plan sponsors to fund their pension promises adequately," he said in a speech March 8 before the District of Columbia Bar Association.
The Senate version of the pension reform bill now being considered by Congress includes a provision that would give airlines 20 years to fund their pension plans, while companies in other industries would have seven years. The House bill includes no such provision.
Mr. Warshawsky also stressed that the final version of the bill should contain further provisions to reduce claims to the PBGC. "The administration is concerned that the reforms currently being considered by Congress are inadequate and that stronger action is needed to improve the protection of pension benefits, to ensure the integrity of the pension insurance system, and to avert a taxpayer bailout," he said.
Research from Standard & Poor's estimated that as of Sept. 30, 2005, the total underfunded level of U.S. airline pension plans was $13.7 billion.
WASHINGTON — The conference committee ironing out differences between the Senate and House versions of the pension reform bill will have three goals, said Sen. Michael Enzi, R-Wyo., chairman of the Senate Health, Education, Labor and Pensions Committee, and conference chairman.
Mr. Enzi, in a news release calling the status of U.S. pension funds a "pension deficit disorder," said the first goal will be to create a bill that makes it easier for corporations to contribute to their pension plans. The second goal will be to ensure the bill is not so draconian that "it causes more bankruptcies and pension plan terminations." The final goal is to shore up the Pension Benefit Guaranty Corp. to forestall a taxpayer bailout of the agency.
DENVER — The Denver Public Schools Retirement System postponed its search for a new executive director until mid- to late May, confirmed John MacPherson, interim executive director. The $2.5 billion plan initiated its search after Robert Scott announced his retirement in October; he left Dec. 31. Mr. MacPherson, former communications director for the Denver school system, said a candidate had been selected last month but he declined to take the job. Mr. MacPherson said the plan would likely reopen the search near the end of the state legislative session, giving lawmakers a chance to clarify issues surrounding the stalled merger between the system and the $30.6 billion Colorado Public Employees Retirement Association. Talk broke down over cost differences in October.
Updates on the search are available on the system's website, www.dpsrs.org. EFL Associates is assisting.
NEW YORK — New York City Retirement Systems returned an annualized 2.3% for the five years ended June 30, 2005, according to city Comptroller William Thompson's fiscal year 2007 budget, released March 8. In comparison, public funds with more than $1 billion in assets in Wilshire Associates Trust Universe Comparison Service had an average annual return of 3.9% for the same time period. The systems' five pension plans lost about $25 billion between 2000 and 2002 because of the stock market decline.
Pension costs are expected to grow by nearly $2 billion through 2009 because of changes to actuarial assumptions proposed by the chief actuary as well as union contract settlements and the cost of the World Trade Center disability law.
Jeff Simmons, spokesman for Mr. Thompson, did not return calls by press time seeking comment.
CHICAGO — Illinois State Board of Investment's investment committee on March 23 will consider Boston Co., Arrowstreet and Batterymarch to run active international large-cap equities for the $11.4 billion Chicago-based fund, said William R. Atwood, executive director. The committee could recommend hiring any or all three of the firms, he said.
Separately, the committee also is considering commitments to real estate equity and private equity firms.
The committee will evaluate the three international large-cap firms against the board's existing active international large-cap equity managers — Templeton Investment Counsel, which runs $303 million; UBS Global Asset Management, $301 million; and Walter Scott & Partners, $232 million. The board could terminate any or all three firms, he said.
"With the size of our staff, it's unlikely the board would want to have more than three international large-cap equity managers in total," said Mr. Atwood. "The board has three (such managers) now. The board might decide to hire all three or one or two or none, leaving the existing managers in place." Funding will depend on the board's hiring decisions. Consultant Marquette Associates is assisting.
The investment committee also is considering committing $25 million each to Walton Street Capital and CitiEurope in real estate equity and $25 million to Madison Dearborn V, a private equity fund, Mr. Atwood said. The committee will consider recommending all three managers at its March 23 meeting, he said. Townsend Group is assisting with the real estate evaluation, while ISBI staff is handling the private equity evaluation. Funding would come from cash, he said.
HARRISBURG, Pa. — Public School Employees' Retirement System of Pennsylvania reported an 11.45% return on investments for the year ended Dec. 31, according to a news release from the $54.8 billion system. The gains were driven by real estate, up 29.62% from 2004; alternative investments, with a 27.27% increase; and international equity, up 19.03%. It's the third consecutive year of double-digit returns — the system returned 14.9% in 2004 and 25.11% in 2003.
At the end of 2005, the fund had 41.7% of assets in domestic equities, 22.5% in international equities, 17.6% fixed income, 9.4% alternatives, 6% real estate and 2.8% in cash and cash equivalents.
SAN FRANCISCO — Four union pension funds on March 7 filed a class-action lawsuit against Hewlett-Packard Co., Palo Alto, Calif., claiming the firm did not seek required shareholder approval for the estimated $21.4 million to $42.5 million severance package for former CEO Carleton S. "Carly" Fiorina. The suit claims Hewlett-Packard breached a company policy to "seek shareholder approval before authorizing the payment of any severance benefits in excess of 2.99 times the salary and target bonus of the terminated executive," according to the lawsuit, filed in U.S. District Court in San Francisco. Ms. Fiorina's severance exceeded the permissible amount by as much as $28.5 million, the suit stated.
"We don't know how much specifically was negotiated as part of her severance package," said Michael Barry, a partner of Grant & Eisenhofer, the law firm representing the funds. He noted some of her payment was pension benefit and sale of stock. "At least $21.4 million was negotiated as part of her severance," he added.
The suit was filed by the $1.1 billion Service Employees International Union National Industry Pension Fund; the $430 million SEIU Affiliates, Officers and Employees Pension Plan; and the $101 million SEIU Employees Pension Plan, all based in Washington. The fourth class-action plaintiff is the Indiana IBEW Electrical Workers Pension Trust Fund, Indianapolis.
Robert Serbin, HP spokesman, said company officials declined to comment.
VIENNA, Va. — Proxy Governance and Class Action Claims Management reached an agreement to provide securities class-action research and claims filing services for institutional investors, according to a statement from Proxy Governance.
"This strategic alliance will provide our clients with access to information on hundreds of pending settlements," Steven M.H. Wallman, Proxy Governance chief executive officer, said in a statement. "There currently is approximately $30 billion available to investors in securities class-action settlements. However, less than 30% of institutional investors regularly file claim forms to participate in these settlements. For a large institutional investor, this could mean millions of dollars per year left on the table."
"We share Proxy Governance's goal of building long-term shareholder value," Michael Egan, CAMC managing director, said in the statement.
Proxy Governance also formed an alliance with the Association of British Insurers for exclusive rights to sell ABI's proxy research to U.S. and Canadian clients, according to a separate Proxy Governance statement.
ABI operates Institutional Voting Information Service, a corporate governance advisory service for its 400 member companies that provides proxy research coverage of the approximately 700 companies in the FTSE All-Share index. The index represents 99% of the U.K. market capitalization.
SANTA ROSA, Calif. — Sonoma County Employees' Retirement Association is studying whether to permit Grantham, Mayo, Van Otterloo to include its Alpha-Only Fund as an investment option within a $145 million global equities portfolio managed for the $1.4 billion pension fund. The GMO portfolio invests in various underlying GMO funds. GMO may be required to make a presentation to the association's board, said Gary Bei, administrator.
Ennis Knupp is the consultant.
SAN ANTONIO — AT&T Inc.'s agreement to acquire BellSouth Corp. would give the combined company a total of $93.8 billion in pension assets — $66.7 billion in defined benefit assets and $27.1 billion in defined contribution assets, according to data from Pensions & Investments. That would rank the new company ninth among the top U.S. plan sponsors, and make it the second-largest corporate retirement plan sponsor, behind General Motors Corp.
"Moving forward, it's a little too early to speculate what may or may not happen," said Brent Fowler, a BellSouth spokesman. "Both companies have very solid pension plans. If anything (the deal) would solidify and make our pension plans more secure. But it's very, very early in the deal to speculate about what would happen."
Anne Vincent, an AT&T spokeswoman, declined to comment on the merger's possible impact on the companies' pension plans.
CHICAGO — Moody Bible Institute selected new asset classes for its $39 million pension fund. Jim Chadwick, chief of investments, said the fund allocated 13% of assets to a passive TIPS portfolio benchmarked to the Lehman Brothers U.S. TIPS index and 4% to a passive fixed-income portfolio benchmarked to the Citigroup World Government Bond index. Another 8% will in a REIT index fund, but fund officials have not yet selected an index, he said. Funding came from a redistribution of assets; the changes were made for diversification and to reduce risk, Mr. Chadwick said. The portfolios are run by Northern Trust, the fund's sole manager, which manages all assets in passive strategies.
PORTLAND, Maine — IW Financial added a Sudan data screen to its portfolio analysis platform, enabling plan sponsor and asset manager clients to identify publicly traded companies for exposure to that country, according to a statement by the firm. Conflict Securities Advisory Group is providing the research for IW Financial.
"We have seen a significant increase in the level of interest in Sudan on the part of our clients," Sam Pierce, IW Financial CEO, said in the statement. "The issue poses compliance problems for money managers working with clients who require divestiture and, at the same time, presents opportunities for those working with clients who are concerned about human rights. Adding data from CSAG to the IWF Workstation gives asset managers a streamlined way to analyze their portfolios and move them into alignment with the new mandates."
IW Financial's platform already analyzes portfolio holdings for an array of corporate practices and social criteria.
DARIEN, Conn. — Institutional investors are expected to spend nearly $4.86 billion a year on internal investment research by 2009, up from $2.44 billion in 2004, according to a report from research industry analyst Integrity Research Associates. "Our analysis shows that institutional investors will be forced to rely on their own internal research in the coming years, as regulatory pressures have prompted dramatic changes at investment banks and brokerage firms," Michael W. Mayhew, CEO of Integrity Research, said in a news release.
Mr. Mayhew said he expects the share of in-house equity research to reach 41% of total equity research by 2009, up from 26.2% in 2004, reflecting both the decline in brokerage research and limited use of independent research.
"Buy-side firms will invest more on internal research as sell-side firms reduce their research staffing and coverage," he said in the release.
Mr. Mayhew did not respond to telephone calls seeking further comment.
MODESTO, Calif. — Stanislaus County Employees' Retirement Association narrowed its search for an active domestic large-cap growth equity manager to six finalists. The managers are: Ark Asset Management; Delaware Investments; INTECH; Loomis Sayles; Wellington Management; and Wells Capital Management. The manager selected could be awarded all or part of a $179 million active large-cap growth portfolio run by MFS Investments. A selection could be made as early as the $1.3 billion pension fund's investment committee meeting March 28.
Strategic Investment Solutions is assisting.