WASHINGTON — The Pittsburgh Brewing Co. pension plan was taken over by the PBGC, confirmed Jeffrey Speicher, PBGC spokesman. The brewing company, which entered Chapter 11 bankruptcy protection in December, has $12 million in pension assets to cover $24 million in promised benefits. The plan, which has been frozen since 1995, was officially terminated in April 2005. The PBGC will assume roughly $11 million of Pittsburgh Brewing's shortfall.
NEWS BRIEFS: Pittsburgh Brewery plan taken over by PBGC
PORTLAND, Ore. — Oregon University System plans to outsource the administration of its $22 million 403(b) plan, said Denise Yunker, director of human resources for the system, which comprises seven state universities. The plan uses 17 investment managers and would like to scale that down to lower fees, Ms. Yunker said; she declined to identify the managers. The board would like the redesigned plan up and running by Jan. 1, she added. Mercer Human Resource Consulting is assisting.
CHAMPAIGN, Ill. — State Universities Retirement System of Illinois hired Quantitative Services Group to evaluate how often its investment managers are trading on the Chicago Stock Exchange and with minority- and female-owned brokerage firms, said Dan M. Slack, executive director.
The $14.4 billion system hadn't been able to quantify Chicago Stock Exchange usage by its managers, and it had performed the minority- and female-owned brokerage analysis internally with the assistance of custodian Northern Trust and the system's managers, he said. System officials think minority- and female-owned brokerage use was being underreported, he said.
The fund's equity and fixed-income separate account managers, both domestic and international, are required to direct 5% to 25% of total commissions to minority- and female-owned brokerage firms, subject to best execution, depending on the asset class.
The fund will use the QSG analysis to report such usage to the state Legislature and governor's office under state directives.
BISMARCK, N.D. — North Dakota Teachers Fund for Retirement hired Buck Consultants to perform an audit of the pension plan's current actuary, Gabriel Roeder Smith, confirmed Fay Kopp, deputy executive director for the North Dakota State Investment Board, which oversees the plan.
The audit will be performed because officials of the $1.5 billion teachers fund hope to push legislation — including an increase to the employer contribution rate increase and a benefit reduction for new hires — during the next legislative session starting in January 2007. "We just wanted to be sure all our numbers are correct" in preparation for that, Ms. Kopp said.
TACOMA, Wash. — Russell Investment Group upgraded its online pension forecasting service to include a broader range of scenarios for fund officials to use in analyzing their plans, said Matt Burkhard, spokesman. The expanded Pension Navigator now includes scenarios that deal with frozen plans and alternative asset classes.
Pension Navigator is available through ClientLINK, Russell's client website, which was upgraded with new features for customizing and viewing account information.
WASHINGTON — General Electric Co., PepsiCo Inc. and Banco Itau Holding Financeira will report their financial information to the SEC using the XBRL searchable data-tagging format informally known as interactive data, according to an SEC statement.
Now, 20 companies have joined the initiative, according to the statement.
"Interactive data will vastly improve the delivery of financial information to individuals and institutions alike," SEC Chairman Christopher Cox said in the statement about the extensible business reporting language format. "It has the potential to slash hours of waste, cost and inefficiency — not just for the users of financial data, but for the companies that prepare it as well."
"Interactive data permits individual investors and analysts to quickly search for individual items of information from financial reports, such as net income, executive compensation or mutual fund expenses," the statement said.
The arrangement with the companies "will last for at least one year, during which the firms will provide feedback to the SEC on their experience with interactive data," the statement said.
SPRINGFIELD, Ill. — Illinois Teachers' Retirement System announced that divestment of $2.4 billion of Sudan-related investments from commingled index accounts since Jan. 26 has cost the system $1.2 million. The $36.8 billion plan has another $900 million in Sudan-related investments to divest. State law requires all Illinois public funds to divest any Sudan-related holdings by July 2007.
Separately, the fund's investments returned 4.82% in the first quarter. One-, three- and five-year returns as of March 31 were 15.69%, 17.44% and 8.78%, respectively.
CHICAGO — The National Foreign Trade Council expects to file a lawsuit in two months challenging the Illinois law requiring public pension funds to divest all Sudan-related investments, according to J. Daniel O'Flaherty, vice president of the association of some 300 U.S. companies that trade and invest overseas. The council is selecting a law firm to litigate the case, he said in a statement.
It plans to file the suit in U.S. District Court for Northern Illinois, challenging the constitutionality of the Illinois act on the precedent of the Supreme Court's unanimous ruling in 2000 in the Crosby vs. NFTC case, in which the council successfully challenged a Massachusetts Burma sanctions law that forbade the state to deal with companies doing business in Burma, the statement noted.
WILMINGTON, Del. — New Castle County Council hired accounting firm Clifton Gunderson to audit the financial statements of the $375 million New Castle County Employees' Pension Program as well as the county's financial statements, according to Robert Wasserbach, county auditor.
CHICAGO — Chicago Public School Teachers' Pension & Retirement Fund is considering three finalists to handle a $25 million investment in international real estate, the fund's first such allocation. They are: CPI Capital Partners Europe fund, Prudential Mexico Retail Fund and RREEF/DB Global Opportunities Fund II. The board of the $11 billion plan could make a decision at its June 20 meeting, said Kevin Huber, executive director. Funding would come from distributions from other real estate funds, Mr. Huber said.
Townsend Group — which is assisting in the search — recommended the international allocation as "a source of real estate growth" and "to get broader exposure," said David F. Linn, Townsend consultant.
TRENTON, N.J. — New Jersey's state pension funds, which have a combined $74.7 billion in assets, had a total unfunded liability of roughly $18 billion as of June 30, 2005, up from about $12 billion a year earlier, confirmed Tom Vincz, spokesman for state Treasurer Bradley Abelow. He said the data came from recently released annual actuarial reports. "There are a combined number of factors why that number has grown so much," Mr. Vincz said, citing the continuing effect of investment losses earlier this decade, the fact that retirees are living longer and previously approved benefit enhancements.
The pension funds gained 8.7% on their investments for the year ended June 30.
NEW YORK — PIMCO CIO Bill Gross thinks the Federal Reserve might have completed its interest rate increases, and the company is focusing its investments on the shorter end of the Treasury curve, Mr. Gross told an audience at the Bond Market Association's annual meeting May 19 in New York.
Uncertainty is high across capital markets, and "during times such as that, it pays to search for areas where you have the highest degree of confidence," Mr. Gross said, adding that "a bet on the front of the U.S. (Treasury yield) curve" is a bet the Fed will stop raising rates around current levels. PIMCO portfolios are shoved to the (short) end of the yield curve to take advantage of relative certainty" that the Fed is done raising interest rates.
On May 10, the Federal Reserve raised the Fed funds rate by 25 basis points to 5%, a level Mr. Gross said could be right to keep inflation in check and the economy growing — although that is "highly uncertain." He noted he also thought the level was right a year ago, at 3%.
The biggest uncertainty for global capital markets is what Japan's central bank will do with interest rates, he said, pointing to forecasts that the short-term rate in Japan could rise by as little as 25 basis points or as much as 300.
In a separate speech, U.S. Treasury Secretary John Snow urged Congress to pass pension reform legislation, calling it "a fundamental issue." He listed transparency of pension plan financial information and the discount rate used to measure plan liabilities as two areas of concern.
"If you have an obligation, you ought to live up to it," he said of pension plans. "That means measuring it the right way and making sure it's transparent. It just doesn't make any sense to systematically mis-measure the liabilities. (Changing) that means using the right discount rate."
BATON ROUGE, La. — The Louisiana School Employees' Retirement System, Baton Rouge, chose Hamilton Lane, HarbourVest Partners, Pantheon Ventures and Wilshire Private Market Growth as finalists in its shortlist search for a private equity fund of funds manager to run an as-yet unspecified allocation. A selection is planned for July 10. Segal Advisors is assisting the $1.5 billion fund.
LONDON — Dresdner Kleinwort Wasserstein is offering an equity volatility arbitrage strategy that takes advantage of the fact that the implied volatility of the S&P 500 index is generally higher than realized volatility. The strategy, which is set up like a three-year note, partially invests in a zero-coupon bond to guarantee principal, while the rest is invested in a leverage account that's used to buy one-month variance swaps, according to marketing material from DKW.
The buyer of a one-month variance swap, an over-the-counter derivatives contract, bets that the predicted volatility of the S&P 500 index over the course of one month, as measured by the Chicago Board Options Exchange Volatility index (also known as the investor fear gauge), will be higher than the actual realized volatility of the S&P 500. The payout formula on the swaps is based on the difference between the strike volatility and the realized volatility.
DKW's back tests over the past 16 years found a 9.1% average annualized return for the strategy, and an average annualized volatility of 2.3%. The new product will be offered directly to hedge funds, money managers and other institutional investors.
LONDON — Investec Asset Management joined Enhanced Analytics Initiative, an international coalition of pension funds, money managers and other institutional investors committing 5% of their annual brokerage commissions to encourage investment research that considers the impact of extra-financial issues, including environmental and corporate governance, on long-term company performance.
As an EAI member, Investec, which manages £31.7 billion ($59.8 billion), will allocate the 5% to the research organizations that best analyze extra-financial issues affecting corporate performance, according to a joint statement from Investec and EAI.
"Our membership of the EAI will focus in particular on the improvement of research coverage of African markets," Hendrik du Toit, Investec CEO, said in the statement. "We are confident that this would contribute to the development of the continent's financial markets, which will ultimately not only result in increased investment into Africa but a better economic growth rate."
"Given our exposure to developing markets, both from an operational and investment point of view, many of the issues espoused by the EAI resonate with us," he added. "The push towards sustainability is paramount, as this is what would ultimately support poverty alleviation and lead to better economic conditions for the majority of people in the world."
HOUNSLOW, England — British Airways' New Airways Pension Scheme had a deficit of nearly £2.1 billion ($4 billion) as of March 31, an increase of £101 million ($190.5 million) from a year earlier, the airline said in a news release. The scheme, which is the airline's primary pension plan, had £5.7 billion in assets as of March 31, John Birch, managing director of British Airways Pension Trustees, said in an interview. In March, the airline issued a proposal to curb the shortfall that would include raising the retirement age, a slower accrual rate, and caps on benefit increases and pension-related pay increases.
The deficit "reflects low long-term interest rates and has gone up despite the company's increased contributions and strong equity markets," CFO Keith Williams said in the release.
Cash contributions to the scheme increased to £246 million for the year ended March 31, from £236 million in the previous year, according to the release.
The airline's British Airways Pension Scheme, which was frozen in 1984, has £6.6 billion in assets and no deficit.
SPRINGFIELD, Ill. — Illinois created a Pension Stabilization Fund to make additional contributions to five state retirement systems when state general fund revenues exceed certain thresholds each year. In addition, the governor would have authority to deposit up to $25 million in the PSF any year, according to the state Commission on Government Forecasting and Accountability.
The fund was created under the state finance budget implementation bill, which awaits Gov. Rod R. Blagojevich's signature.
Based on revenue forecasts, no transfer under the revenue threshold formula would occur for fiscal year 2007, which starts July 1, according to a commission analysis. Mr. Blagojevich hasn't said if he would make any unilateral contribution.
Money would be dispensed from the fund in proportion to each system's share of the total unfunded liability. The legislation specifies that payments would be made only to reduce the unfunded liabilities of the systems, not to reduce state contributions made under the state funding law, the analysis noted.
The five systems are the $34 billion Teachers' Retirement System of the State of Illinois, which has $56 billion in liabilities; $13 billion State Universities Retirement System of Illinois, with $20 billion in liabilities; $10.4 billion Illinois State Employees' Retirement System, with $19.4 billion in liabilities; the $564 million Judges' Retirement System, with $1.236 billion in liabilities; and $83 million General Assembly Retirement System, with $212 million in liabilities.
Citigroup gets borrowing rights to most of CalPERS' auctioned equity assets
SACRAMENTO, Calif. — Citigroup Global Markets won the exclusive borrowing rights to a majority of $76 billion in U.S. equity assets auctioned by the $209 billion California Public Employees' Retirement System, Sacramento, confirmed Brooke Gillman, spokeswoman for eSecLending, which managed the auction. Goldman Sachs, JPMorgan and Lehman Brothers also won exclusive borrowing rights to access portions of the assets, and Metropolitan West Securities was awarded a portion to lend on an agency basis. Ms. Gillman declined to break down how much each firm won in the auction.
DES MOINES, Iowa — Principal Financial Group received a subpoena on May 12 from New York State Attorney General Eliot Spitzer seeking information about the marketing and sale of retirement products and services, confirmed Terri Hale, Principal Financial spokeswoman. The company intends to fully cooperate with the inquiry, she said.
BOSTON — The median foundation/endowment fund returned 5.1% on its investments in the first quarter, narrowly outpacing the median public pension plan, which returned 5%, and the median corporate pension plan, which returned 4.5%, according to Mercer Investment Consulting.
Mercer's analysis also found that the median large-cap value equity manager, which returned 5.3%, outperformed its large-cap growth counterpart by 160 basis points in the first quarter. The median small-cap manager gained 12.7% in the period, compared with only 4.4% for the median large-cap manager.
In fixed income, the median core manager returned -0.4% in the first quarter, outperforming the Lehman Brothers Aggregate index by 20 basis points, according to Mercer. Core opportunistic managers returned -0.3% in the quarter, outperforming the index by 30 basis points.
WASHINGTON — The ERISA Industry Committee is lobbying Congress to delay implementation of corporate pension funding rules contained in both the House and Senate versions of the pension reform bill until Jan. 1, 2008, Janice Gregory, a senior vice president for the committee, said in an interview.
"The new funding requirements would kick in at the beginning of 2007, and for a calendar-year pension plan, that would be incredibly problematic," said Ms. Gregory. "We're doing a complete rewrite of the funding rules."
The funding requirements could change the way corporations could calculate a discount rate from the current mix of Treasuries and corporate bonds. Also contained in the different versions are proposals to shorten the number of years companies have to fully fund their pension plans. Contribution requirements would also be strengthened under the different bills.
When asked how the group's lobbying efforts are being received, Ms. Gregory said: "Well, they didn't call us crazy and didn't throw us out of the room. I think our proposal is being well received."
DETROIT — General Motors Corp. sold 15.5 million shares of DirecTV Group Inc. held by two GM pension plans, according to a news release from DirecTV. The shares, which were sold to El Segundo, Calif.-based DirecTV May 24, are valued at a total of roughly $265 million. The shares were held by General Motors Special Hourly Employees Pension Trust and the General Motors Special Salaried Employees Pension Trust. GM had $94 billion in defined benefit assets as of Sept. 30, according to Pensions & Investments; the company does not break out assets of individual plans.
At the close of the latest transaction, DirecTV will have acquired $2.24 billion of its company stock from GM's pension plans in a $3 billion share repurchase program between the two companies.
GM spokesman Jerry Dubrowski was not immediately available to provide further details.
U.S. Trust acted is the independent trustee for the GM pension plans involved in the transaction.
LONDON — The British Telecommunications Pension Scheme, London, almost halved its deficit in a year because of rising bond yields and strong stock investment performance, according to preliminary annual results released May 18.
As of March 31, the £36 billion ($68.036 billion) fund's deficit totaled £1.8 billion, compared with £3.3 billion a year before, said Mike Bartlett, BT's chief press officer. BT plans to contribute about £630 million to the pension scheme, including an annual amount of £232 million until the deficit is closed.
The pension plan, which is the largest in the United Kingdom, is managed by Hermes Pensions Management. The plan returned 20.8% overall in 2005, according to Charlie Metcalfe, Hermes' deputy chief executive and head of business development.
"The investment strategy has been changing consistently over the past several years," Mr. Metcalfe said in a telephone interview. "We've continued to reduce U.K. equities exposure as well as the overall equities exposure, shifting (assets) into alternative assets such as private equity, absolute returns and commodities. The fixed-income element has also increased slightly.
"We will continue to focus on alternatives; that will definitely continue," he added.
IRVING, Texas — ExxonMobil Corp.'s independent directors are being asked to discuss the financial impact of climate change with a group of leaders from 17 major pension funds and other institutional investors, including the $209 billion California Public Employees' Retirement System, Sacramento, and the $23 billion Connecticut Retirement Plans and Trust Funds, Hartford.
"We are interested in discussing with board members on the Public Policy Committee your plans to manage the transformation of ExxonMobil from a 20th century oil company to a company that will meet the world's energy demands within carbon constraints in the 21st century," stated a letter that the group sent to Michael J. Boskin, director and chairman of the public issues policy committee of the board of the Irving, Texas-based company.
"We're not asking ExxonMobil to get out of the oil and gas business, but the concern with the imperative of climate change and the world reaction to it will change nature of oil industry," Donald Kirshbaum, investment officer for policy for the Connecticut treasurer's office, said at a teleconference May 18.
"We are not interested in divesting" on climate change concerns, Mr. Kirshbaum said; instead, Treasurer Denise L. Nappier, sole trustee of the Connecticut fund, "is interested in working with companies in which we invest to enhance the value of our shares."
ExxonMobil is setting up a meeting in July with members of the group and management, but not directors, to discuss these issues, Dave Gardner, media relations advisor, responded in a statement.
"It is our opinion that the most productive way forward is for the group to meet with management," Mr. Gardner said.
"We acknowledge that issues associated with climate are important and warrant thoughtful deliberation and action," he said. "In part, our position includes the fact that we recognize that the accumulation of greenhouse gases in the Earth's atmosphere poses risks that may prove significant for society and ecosystems. We believe that these risks justify actions now, but the selection of actions must consider the uncertainties that remain," he added.
Mr. Kirshbaum said the group agreed to meet in July with Exxon Mobil management but is still seeking a meeting with directors.
ALBANY, N.Y. — New York State Common Retirement Fund committed $3.5 million to Application Security Inc., a New York-based cyber-security firm, according to John Chartier, spokesman for Alan G. Hevesi, state comptroller and sole trustee of the $140 billion fund. The commitment was made through private equity fund Paladin Homeland Security, which also invested $3.5 million in the company.
PLAINSBORO, N.J. — Fewer than one-third of workers feel adequately prepared for retirement, according to the 2006 Merrill Lynch New Retirement Study. According to a survey of 5,000 people, 71% of adults said their expectations for retirement involve working in some capacity. And of those who plan to work during retirement, almost half don't plan to ever completely stop working.
The survey was conducted by Merrill Lynch and Harris Interactive in December.
PITTSBURGH — Mellon Financial Corp. on May 17 agreed to buy Walter Scott & Partners, an Edinburgh-based global and international equity manager. Terms were not disclosed. The firm will operate as an independent Mellon subsidiary and will retain its name. The acquisition will add £14.3 billion ($27 billion) to Mellon's overall assets under management, raising its total to $880 billion. The transaction is part of Mellon's plan to expand its overseas investment strategies to meet increasing demand, according to a news release from Mellon. In the last decade, Mellon's non-U.S. client assets under management have grown to more than $100 billion from about $2 billion, the release said.
"The rationale for this is quite strategic in nature," Ronald P. O'Hanley, Mellon vice chairman and president of Mellon Asset Management, said in a telephone interview. "For us, this is a distinctive manager focusing on a buy-and-hold, large-cap-oriented strategy with very low turnover, and that's different from what we have. For Walter Scott, it is a high-quality investment manager facing what a lot of managers of this size are facing, and that's how to gain access to more distribution, client services and operational and technology support. In order to grow, it needs to invest in those functions or partner with somebody like us."
Walter Scott, who holds a doctorate in nuclear physics from Cambridge University, will remain chairman of the eponymous firm and report to Mr. O'Hanley.
SAN FRANCISCO — Guardian Life Insurance Co. of America will acquire a 65% stake in RS Investments, confirmed Dennis Manning, Guardian CEO. The deal will make RS Investments an independent subsidiary of Guardian, with RS Investments CEO Terry Otton and the existing management team remaining at the helm. Terms of the agreement were not disclosed.
Guardian's Park Avenue Portfolio family of 13 core equity and fixed-income mutual funds will be branded under the RS Investments name and integrated with RS Investments' 11 growth and value mutual funds later this year, subject to necessary approvals, company executives said. There will be no changes to RS Investments' portfolio management, Mr. Otton said. With the changes, RS Investments will have $17 billion in assets under management, up from the current $11.8 billion.
"We view this (deal) as a significant win for our shareholders," Mr. Otton said. The transaction creates "equity incentives" for the next generation of RS professionals, he added.
NEW YORK — Bank of New York has combined its U.S. and European asset-servicing businesses into one unit based in London, and it also combined its client management businesses, according to Kevin Heine, a bank spokesman.
The global investor services unit will be headed by Timothy F. Keaney, who was promoted to senior executive vice president from executive vice president. Mr. Keaney will remain head of investor services for Europe. Patrick Curtin, executive vice president, will continue to manage the investor services business in the United States.
Torry Berntsen was promoted to senior executive vice president from executive vice president. He will run the new global client management unit, which is based in New York and combines client management teams in more than 100 markets worldwide into one unit. Also, Kenneth A. Lopian was promoted to senior executive vice president and deputy head of global client management; he was executive vice president, and he will continue to oversee global sales coordination for the bank.
NEW YORK — Ardour Capital Investments launched a global alternative energy index called the Ardour Global index, said Joseph LaCorte, a managing director of consulting firm S Network and member of the AGI committee. The index, which includes 74 global alternative energy stocks, is broken into two subindexes, one covering companies in North America and the other covering companies in Europe.
"Some other alternative energy indexes are all domestic, and no one knows where the next breakthrough is going to come from," he said. "The other differentiator is that this is absolutely targeted to be a pure play. Some (alternative energy indexes) have utilities, and some include General Electric because they have a solar panel group."
Ardour officials plan to license the index "for a whole host of products," including unit investment trusts, structured notes and ETFs, both in the United States and Europe, he said.
LONDON — Schroders may consider an acquisition to accelerate expansion of its U.S. asset management business, and it has up to about £800 million ($1.5 billion) available to pay for any potential targets, CEO Michael Dobson said in a conference call May 16. Schroder Investment Management North America makes up about 12% of Schroders' entire business and is predominantly retail.
"The U.S. is an area where we want to do more," Mr. Dobson said. "We will grow organically there, but if we find something that can accelerate that, we would be interested."
Globally, the company boosted its assets under management by 4.8% in the three months ended March 31 to £128.4 billion, partly as a result of strong stock market performance and a £1.9 billion inflow from its retail business, according to financial reports released May 16. Institutional outflows for the quarter were £2.3 billion, due to a continuing trend to specialist mandates from balanced portfolios.
Schroders also announced the May 3 completion of its acquisition of NewFinance Capital, a hedge fund-of-funds manager, for $101 million and another $41 million contingent upon certain revenue targets in the next four years.
NEW YORK — Compensation in the asset management industry in 2006 is expected to increase by 5% to 15% over last year, according to a new report from Johnson Associates, a compensation consulting firm. Traditional equity money managers will see a 10% to 15% overall increase in their compensation this year, Johnson Associates estimated, based on strong net inflows and market appreciation seen in the first quarter. Hedge fund managers will receive an estimated 15% increase in compensation, based on first-quarter net inflows. Fixed-income managers will receive an estimated 5% increase in pay, with net outflows and rising interest rates depressing overall compensation.
Money managers for international strategies will likely receive a greater compensation increase than managers of domestic strategies, with growth in Asia, Europe and emerging markets outpacing growth in the United States, according to the report.
NEW YORK — FASB's proposed first round of changes to FAS 87, the accounting rule regarding pension reporting, could cost shareholders of S&P 500 companies more than $248 billion, according to a new research report from Credit Suisse. The Financial Accounting Standards Board earlier this year recommended that U.S. public companies report the funded status of their pension plans on their balance sheets, as well as other postretirement employee benefit costs. Companies now can put that information in the footnotes section of their annual reports.
Under the proposed changes, S&P 500 companies would immediately show $145 billion in pension liabilities and $327 billion in OPEB costs, and would have aggregate shareholder equity reduced by an average of 6% per share, according to CS analyst David Zion's report, "The Hit to Equity." The report predicts that some companies may use available cash to help reduce the hit to equity, while others may seek to borrow to fund their pension plans.
The report said companies that would have been hit hardest in 2005, in terms of underfunded status and OPEB costs as a percentage reduction of their aggregate shareholder equity, are Goodyear Tire & Rubber Co. at 1,164%; Lucent Technologies, at 371%; General Motors Corp. at 277%; and Ford Motor Co., at 116%.
NEW YORK — Capital Z made an investment in Aviator Fund Management, a hedge fund manager that invests in key Asian markets using multiple strategies. The size of Capital Z's investment was not disclosed, but it is the firm's third investment in an emerging hedge fund manager in the last 12 months, according to a company statement. Capital Z's investment in alternative asset managers totals $2.25 billion.
ST. LOUIS — A St. Louis pension task force benefits subcommittee will meet for the first time in mid-June to begin its evaluation of the city's three pension plans, said Richard Frank, city personnel director and secretary of the city's $528 million Employee Retirement System.
Mayor Francis G. Slay formed the City Pension Task Force, composed of benefits and actuarial subcommittees, earlier this year to address the combined $300 million unfunded liability of the three pension plans — the Employee Retirement System, the $690 million Police Retirement System and the $415 million Firemen's Retirement System. City officials hope to implement any recommended changes within the next 12 to 18 months. The plans are not likely to be frozen, but a "hybrid" defined benefit/defined contribution system is a possibility, Mr. Frank said.
The task force includes representatives from the three pension systems.
WAUKESHA, Wis. — 401(k) plan participants who receive face-to-face investment advice last year achieved an annual investment return 2.5 percentage points greater than those who did not receive advice, according to a study by Carroll College of Waukesha, Wis., and Francis Investment Counsel.
In addition, employees who both participated in group retirement education sessions and received individual investment advice invested in an average 7.8 mutual funds each, compared with 5.6 mutual funds each for employees who used group retirement education alone and 5.3 funds each for employees who received no education or advice, confirmed Stephanie Truog, spokeswoman for Francis Investment Counsel. The additional diversification resulted in reduced portfolio volatility — 0.19% variance in returns for the first group vs. 0.26% variance for the second group and 0.27% for employees who received no education or advice.
SACRAMENTO, Calif. — The CalPERS board wants the California Legislature to indemnify the pension fund against losses should lawmakers pass a bill requiring the $210 billion California Public Employees' Retirement System and the $145 billion California State Teachers' Retirement System, both in Sacramento, to divest themselves of securities of companies with ties to Sudan. Currently, the bill would indemnify only board members and officers. The CalPERS board May 15 approved a position supporting constructive engagement with portfolio companies doing business in Sudan.
Board members said the fund could not afford to incur nearly $1 billion in losses, as it did when it divested itself of South Africa-related securities in the 1980s.
CHAMPAIGN, Ill. — Illinois State Universities Retirement System moved $350 million to a CoreActive enhanced bond strategy from a Lehman Universal Bond Index Fund — both run by Barclays Global Investors — as a result of the state's Sudan divestment law, said Daniel L. Allen, CIO of the $14.4 billion fund. The BGI universal index fund won't be able to meet certification requirements under the law and the firm doesn't offer a Sudan-free fixed-income index fund, Mr. Allen said. Ennis Knupp assisted.
HARRISBURG, Pa. — Pennsylvania Public School Employees' Retirement System has filed a securities fraud lawsuit against Qwest Communications International Inc., Denver, and several of the company's former directors and employees, confirmed Evelyn Tatkovski, PennPSERS spokeswoman. The complaint, filed earlier this month in U.S. District Court in Philadelphia, claimed that the $57 billion retirement system purchased shares of Qwest common stock "at prices that were artificially inflated due to Qwest's improper financial reporting" from 1999 to 2002. PennPSERS also named Qwest's former auditor, Arthur Andersen, as a defendant in the suit.
The system alleged that it lost more than $10 million in 2002 when Qwest restated previously issued financial statements, causing the value of its stock to decline more than 80%, according to the filing.
Qwest spokesmen did not return calls by press time seeking comment on the lawsuit.
RICHMOND, Va. — Media General Inc. will freeze its $265 million pension plan as of Dec. 31 and enhance its $257 million 401(k) plan, confirmed spokeswoman Liz Cleal. Company officials think defined contribution plans are more financially predictable than pension plans, she said.
The 401(k) match will be increased to 100% on the first 5% of employee contributions, up from 4% currently, according to a company statement. Media General will also add a profit-sharing component to the 401(k) plan with an annual target payout of 4% of salary.
COLUMBUS, Ohio — Ohio School Employees Retirement System heard presentations from Summit Strategies Group, Callan Associates, R.V. Kuhns & Associates and Mercer Investment Consulting in its general consultant search, said Julie Graham-Price, spokeswoman for the $9.2 billion fund. The contract of incumbent Russell Investment Group was set to expire at the end of the second quarter. Ms. Graham-Price could not say if Russell is being considered.
A selection is expected this summer. The fund issued an RFP in November.
ARLINGTON, Va. — Arlington County Employees' Retirement System is conducting a shortlist search for an active domestic small-cap growth equity manager to run about $50 million, said Gregory A. Samay, chief of staff.
Money for the new hire will come from Vanguard, which is being terminated as manager of a $40 million VIPER ETF index portfolio for the $1.3 billion fund; Mr. Samay said the system wanted to move to an active strategy. Any additional funding would come from a general redistribution. Vanguard still manages a $40 million money market fund for the system, he said.
Consultant Ashford Capital Management is assisting.