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June 26, 2006 01:00 AM

NEWS BRIEFS: SSgA adds 6 industry-specific ETFs

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    BOSTON — State Street Global Advisors launched six industry-specific exchange-traded funds on the American Stock Exchange, said spokeswoman Melissa Murphy. With the additions of the SPDR Metals & Mining, SPDR Pharmaceuticals, SPDR Oil & Gas Equipment & Services, SPDR Oil & Gas Exploration & Production, SPDR Retail and Street Tracks KBW Regional Banking funds, SSgA now manages a total of 65 ETFs worldwide.

    The "precise exposure to targeted industries" offered by the latest ETFs should help investors seeking higher returns through "more refined portfolio construction," Greg Ehret, a senior managing director, said in a news release.

    Merrill Lynch launches commodity index

    NEW YORK — Merrill Lynch today launched the Merrill Lynch Commodity index eXtra, confirmed spokeswoman Carrie Gray. The MLCX is a rules-based index where commodity futures contracts are initially selected by liquidity and then weighted by the importance of each commodity in the global economy. It provides more exposure to downstream commodities, according to a news release, such as soybean meal or heating oil.

    Missouri Investment Trust switches to Alpha Select

    JEFFERSON CITY — The Missouri Investment Trust will invest $5 million in State Street Global Advisors' International Alpha Select Fund, confirmed Mark Hughes, spokesman for state Treasurer Sarah Steelman. The investment, an enhanced index fund that screens for stocks of companies that have ties to terrorist states or U.S.-sanctioned nations, replaces an MSCI EAFE index fund also run by SSgA. Fund officials issued an RFP in October.

    The new investment protects the value of the fund because investments with links to terrorism put fund holdings at risk, said Ms. Steelman. She is also chairman of the board for the trust, a $23.4 million state fund designated by lawmakers for the arts and humanities.

    SSgA will subcontract with consulting firm Conflict Securities Advisory Group to identify stocks with global security risk.

    Babson Capital closes Avon Ridge synthetic CDO

    CAMBRIDGE, Mass. — Babson Capital Management closed Avon Ridge CSO, a $130 million synthetic collateralized debt obligation, said Matthew Natcharian, the managing director who heads the firm's structured credit team. Synthetic CDOs use credit default swaps to securitize the inherent credit risk of the portfolio's underlying collateral. In a news release, Mr. Natcharian cited strong interest from global institutional investors, including banks and insurers, "who want leveraged exposure to corporate credit risk."

    ProShare introduces ETFs with short or magnified index exposure

    BETHESDA, Md. — ProShare Advisors unveiled eight exchange-traded funds designed to provide investors with short or magnified exposure to an index, marking the first time ETFs have built in this capability, said Michael Sapir, chief executive officer. The funds began trading on the American Stock Exchange June 21.

    They are divided into two main categories. One will provide short exposure to four well-known indexes by moving in the opposite direction of the underlying index, enabling investors to hedge against factors such as market events or political risk. The other category is designed to seek daily investment results that are twice the performance of the underlying index. Indexes underlying the funds are the Dow Jones Industrial Average, the S&P 500 index, the Nasdaq 100 index and the S&P MidCap 400 index.

    ProShare also hired JPMorgan Worldwide Securities Services to provide accounting, administration, transfer agency and custody services for the eight ETFs.

    Oregon Investment Fund invests in energy fund

    SALEM, Ore. — The Oregon Investment Fund is making a "significant investment" in Nth Power Fund IV, a sustainable and renewable energy fund, according to a news release. The OIF, a fund of funds run by Credit Suisse for the $56 billion Oregon Public Employees Retirement Fund, Salem, and overseen by the Oregon Investment Council, Tigard, did not disclose the amount of the commitment. OIF has six commitments totaling $56 million.

    Dealmakers like M&A acquisition environment

    The mergers and acquisition environment is good or excellent, according to 90% of dealmakers — that's up from 85% last year, according to the Association for Corporate Growth/Thomson DealMakers Survey results.

    Global mergers and acquisitions totaled $1.613 trillion as of June 13, up 41% from the same period last year, when there were $1.143 trillion deals. Close to half of respondents, 49%, stated they expect to be involved in an international deal in the second half of 2006 and 43% indicated that international deals are becoming more important to their firms. Most stated that they expect the deals to be in Western Europe, 46%; China, 37%; and Canada, 31%.

    Some 33% of private equity executives stated most of their deals will be in middle-market buyouts, 27% indicated small buyouts, 18% early stage venture capital and 11% later stage venture capital. Forty-four percent of respondents expect potential investments to be in the United States, while 18% indicated China, 9% India and 7% Western Europe.

    The survey, conducted in May, was of 1,201 ACG members and Thomson Financial customers, with the majority in the United States.

    Douglas Emmett files for record $1.3 billion REIT IPO

    SANTA MONICA, Calif. — Douglas Emmett filed an IPO to raise $1.3 billion and become a REIT, according to documents filed with the SEC. It would be a record IPO for a REIT. The Santa Monica, Calif., real estate development firm would top KKR Financial Corp.'s $910 million REIT that was taken public last year. The Douglas Emmett 2005 REIT, formed in February 2005, would merge with the new REIT after the IPO, the SEC documents indicate.

    2 states add 401(k) feature

    The State of North Carolina 401(k) Plan, Raleigh, will add a Roth 401(k) contribution feature to its $3.5 billion plan, said Sara Lang, spokeswoman. Prudential Retirement is the plan's bundled provider. The plan offers nine investment options.

    The $620 million Kentucky Public Employees' Deferred Compensation Authority, Frankfort, also will add a Roth 401(k) contribution feature July 1, according to the plan's website. The plan's bundled provider is Nationwide Financial Services. The plan offers 23 core investment options, plus four lifecycle funds. Robert Brown, executive director, did not return calls seeking additional information.

    U.K. pooled assets average -5.3% return in May

    LONDON — U.K. pension plans' £391 billion ($720 billion) in pooled fund assets returned an average -5.3% in May on the heels of negative equity market returns, according to Mellon Analytical Solutions (Europe).

    Balanced pooled funds returned 18.2%, 14.8% and 4.1% for the respective one-, three- and five-year periods.

    Emerging market equities were the worst-performing sector during May, with a -13% investment return. Property had the best return, 1.3%.

    Average equity weightings fell to 83.6% for the month from 85.2% in April, as managers increased their cash allocations by 0.7 percentage points to 5.7%.

    Illinois SURS to add an investment officer

    CHAMPAIGN, Ill. — Illinois State Universities Retirement System is looking for an investment officer to help oversee its $250 million manager development program, which is designed to promote use of minority- and woman-owned investment advisers, said Daniel L. Allen, chief investment officer of the $14.2 billion system. The new position "reflects our commitment to use emerging managers," he said. The system, which hopes to make a selection in the fall, is still developing qualification criteria for candidates, he said. Anyone interested should contact the system's human resources department.

    Energy Department suspends ban on reimbursements

    WASHINGTON — U.S. Secretary of Energy Samuel W. Bodman suspended a policy ordering the Department of Energy to stop reimbursing expenses for defined benefit coverage for new government contractor employees.

    Mr. Bodman ordered the suspension for one year and directed department staff "to consult with stakeholders, including Congress, to seek their input" on the issue, he wrote in a letter to Sen. Pete V. Domenici, chairman of the Committee on Energy and Natural Resources.

    Mr. Domenici, R-N.M., and Sen. Jeff Bingaman, D-N.M., "worked together to press the DOE to withdraw the proposed pension change," they said in a statement.

    Two bills introduced May 11 — one in the Senate by Sen. Edward M. Kennedy, D-Mass., and one in the House by Rep. George Miller, D-Calif. — would require the secretary of energy to rescind the policy and reinstate reimbursement of any benefits not funded.

    "The department's accrued unfunded liability as reported … in 2005 was $11.6 billion, an increase of 63% since 2000," Mr. Bodman noted in his letter.

    Mr. Bodman said in the original April 27 announcement that the department "will reimburse (new) contractors for the costs of their market-based defined contribution pension plans (similar to 401(k)s) and market-based medical benefit plans" and not defined benefit pension and retiree benefit medical plans. "The new policy will improve the predictability of contractor benefit costs and mitigate the growth of the department's long-term liabilities for these costs."

    CalPERS neutral on Sudan bill, wants indemnification

    SACRAMENTO, Calif. — The CalPERS board is taking a neutral position on a bill that would require the pension fund to divest Sudanese government-related securities unless recently passed legislation is amended, said Brad Pacheco, spokesman. The board wants the bill, which was approved by the California Assembly in early June, to indemnify the fund against losses, Mr. Pacheco said. CalPERS staff had urged board members to oppose the bill, according to a memo to the board.

    The board also discussed other possible ways to achieve indemnification, such as further legislation, Mr. Pacheco said.

    As it stands now, the bill would prohibit the $200.2 billion California Public Employees' Retirement System and the $142 billion California State Teachers' Retirement System, both of Sacramento, from buying securities of companies with ties to the Sudanese government and require the systems to sell existing holdings if the portfolio companies fail to meet a series of tests. CalPERS staff estimates the average transaction cost for selling all of its Sudan-linked securities would be about $1.9 million, excluding market-impact costs, according to a staff memo to the board.

    Separately, CalPERS will extend the contracts of external securities lending managers Metropolitan West Securities and State Street Bank & Trust. The securities lending program generated $129.4 million in earnings for CalPERS in the year ended March 31. The contracts are subject to an annual review by the investment committee, according to a staff memo to the board.

    In addition, the system committed an additional $30 million to the Central Valley Fund, a venture capital fund to expand businesses in the state, confirmed spokesman Clark McKinley. CalPERS already had $10 million invested in the fund. The system has roughly $28.4 billion committed to venture capital, Mr. McKinley said.

    Separately, CalPERS hired Institutional Shareholder Services to give the system's investment staff access to a database of companies identified as doing business in Sudan, according to a staff memo. The system already works with ISS on an ongoing basis for overall proxy advisory services. However, the ISS database will supplement staff's internal research.

    The board also approved a recommendation to hire Financial Engines Advisors, EFI Actuaries and Towers Perrin to update asset and liability models as part of the board's fall 2007 asset-liability workshop, a strategic session held to help the board fine-tune the system's allocations.

    Fidelity splits Special Situations Fund

    LONDON — Fidelity Investments International plans to split its £6.5 billion ($11.9 billion) Special Situations Fund into separate U.K. and global units and named Jorma Korhonen to manage the fund alongside fund manager Anthony Bolton, who will gradually phase out his management duties, according to a company announcement.

    Pending regulatory compliance and a 75% shareholders' approval in July, Fidelity will split the fund in September. The Special Situations Fund will focus only on U.K. equities, and the Fidelity Global Special Situations Fund will target global stocks. Mr. Bolton, who has been managing the Special Situations fund — Britain's largest mutual fund — since 1979, will run both funds in 2006 and continue managing the U.K. fund in 2007. Mr. Korhonen will assume management of the global fund in January.

    At the end of 2007, Mr. Bolton will "move away from day-to-day fund management into a new role at Fidelity, including mentoring and developing our growing fund management team," according to the announcement. A successor for the U.K. fund has yet to be named. Mr. Korhonen now manages two Fidelity global equity funds for investors in Japan and Australia. Spokeswoman Anne Read could not be reached by press time to clarify who will take over Mr. Korhonen's responsibilities with those funds.

    Bank of Ireland, Paul Capital establish joint venture

    Bank of Ireland Group established a joint venture with Paul Capital Partners, a private equity fund-of-funds firm with $1.1 billion in assets.

    PCP founder Philip Yaul will be chairman of the new venture, Paul Capital Top Tier Investments LLC, and Paul Capital general partner David York will be managing director and CEO.

    The deal "allows us to expand, in a practical way, into sectors like midmarket buyouts, emerging markets and co-investment vehicles across the private equity asset class," Mr. York said in a telephone interview. "It also helps us develop client relationships."

    The transaction "represents another step toward our goal of building a diversified portfolio of investment boutiques," Bank of Ireland CEO Brian Goggin said in a prepared statement.

    The bank paid $25 million for 50% of the new joint venture and invested $5 million in existing PCP funds of funds. PCP will retain 35% of the venture, and key Paul Capital officials will hold the remaining 15%.

    Overall, the Bank of Ireland has €162.3 billion ($204 billion) in assets under management as of March 31.

    SunGard acquires 401(k) managed account services provider

    WAYNE, Pa. — SunGard signed agreed to acquire ProNvest Inc., which provides managed account services to 401(k) participants through third-party administrators, Pat McAnally, SunGard spokeswoman, said today. Terms of the transaction have not been disclosed. ProNvest will remain a separate entity.

    SunGard is a financial services software and processing provider.

    Directors happier with executive pay model than investors

    REIGATE, England — Sixty-five percent of directors believe the U.S. executive pay model has contributed to superior corporate performance, compared with just 22% of institutional investors, according to surveys by Watson Wyatt Worldwide.

    Of the 50 corporate directors surveyed, 61% said most executives are overpaid, while 48% think executive pay is too heavily influenced by management, according to a Watson Wyatt statement about the survey's results, released today.

    But of the 55 CIOs and other top investment people at institutional investors surveyed, "90% think that executives at most companies are overpaid, and 87% believe executives have too much influence in how their pay is determined."

    Both groups favored pay for performance. About 60% of directors and institutional investors favored targeting long-term incentives above the market median, the survey found. But the investors think "severance or change-in-control agreements should be positioned below the market median," the statement said.

    More than three-fourths of both directors' and institutional investors' groups favor enhanced disclosure of executive pay information in proxies.

    Overall, 79% of the directors and 85% of institutional investors believe the executive pay model has hurt corporate America's image.

    Both surveys were done earlier this year.

    S&P launches BRIC 40 emerging markets index

    NEW YORK — Standard & Poor's today launched the S&P BRIC 40 index, designed to provide exposure to 40 leading companies from emerging markets of Brazil, Russia, India and China, according to a news release.

    The index is composed of large, liquid companies that trade on the Hong Kong Stock Exchange, London Stock Exchange, Nasdaq and NYSE. "The construction of the S&P BRIC 40 index accounts for both the liquidity of the underlying stocks as well as the liquidity of the overall portfolio, resulting in an index which is more efficient to invest in," said David Blitzer, S&P managing director and chairman of the index committee, in the release.

    The index uses a modified market-capitalization weighting scheme, the release stated. Constituent companies are members of the S&P/IFCI index series and meet minimum market capitalization and liquidity requirements.

    Spokesman David Guarino was not available for comment at press time.

    Midmarket fund counts 5 major endowments among investors

    SAN FRANCISCO — Five university endowments are investors in JH Partners' second midmarket private equity fund, which closed last week with $350 million, said Jeff Hansen, principal. The fund was oversubscribed.

    The five endowments — the $25.9 billion endowment of Harvard University, Cambridge, Mass.; $6.7 billion Massachusetts Institute of Technology endowment, Cambridge; $11.2 billion endowment of Princeton University, Princeton, N.J.; $15 billion endowment of Stanford University, Palo Alto, Calif.; and $5.2 billion Yale University endowment, New Haven, Conn. — also invested in the firm's first fund. Over the past several years, the firm returned $566 million to all investors on $80 million of invested capital, he said.

    PBGC wants more disclosure from Meridian Automotive

    WASHINGTON — The PBGC is saying Meridian Automotive Systems Inc. did not provide enough information on its pension obligations in its bankruptcy reorganization disclosure statement.

    In a filing last week with the U.S. Bankruptcy Court in Wilmington, Del., the PBGC claimed the Allen Park, Mich., auto parts manufacturer could potentially cost the pension agency roughly $17 million in pension liabilities. The PBGC noted in the filing that it plans to contest a consolidation that would deprive the PBGC of the opportunity to file separate claims for the full amount of liabilities, minimum funding contributions and premiums.

    The Bankruptcy Court is set to hear arguments June 27 on the disclosure statement. Meridian filed for Chapter 11 bankruptcy protection in April 2005.

    Richard Mahony, a spokesman for Gavin Anderson & Co., which represents Meridian, was not available for comment at press time. PBGC spokesman Gary Pastorius said he couldn't comment beyond the court documents.

    PG&E allowed to recover revenue associated with contributions

    SAN FRANCISCO — PG&E Corp., San Francisco, reached a settlement with the California Public Utilities Commission allowing the company to recover revenue associated with annual pension contributions between 2006 and 2009, according to a June 16 SEC filing. The fund, which had $7.8 billion in assets as of Sept. 30, 2005, was 98.6% funded as of Jan. 1, 2005. With the settlement, the pension fund should be fully funded by Jan. 1, 2010.

    Additionally, PG&E will make an annual contribution of $153 million, in addition to other pension-related contributions of $98 million for each year from 2007 through 2009.

    Illinois SURS may add $300 million to private equity

    CHAMPAIGN, Ill. — Illinois State Universities Retirement System could commit up to $300 million in private equity in the next 12 months, said Daniel L. Allen, CIO of the $14.2 billion system. Fund officials are considering searching for fund-of-funds managers, he said. The board could make a decision at its meeting on Sept. 15, when it discusses how it will proceed with implementation.

    Initially, the board likely will look at the fund's existing private equity managers, Mr. Allen said. They are Adams Street Partners, which manages or has commitments of $420 million; Pantheon Ventures, $200 million; Muller & Monroe Asset Management, $25 million; and Progress Investment Management, $9 million.

    Mr. Allen said the state's Sudan-related investment restrictions will be a factor in the implementation, because managers have to certify compliance.

    The system is trying to get closer to its 5% private equity target allocation, he said; funding would come from reducing domestic equities.

    MSIM introduces Equities Plus enhanced strategy

    NEW YORK — Morgan Stanley Investment Management introduced an enhanced index strategy called Equities Plus, confirmed spokeswoman Andrea Slattery. Its goal is to provide S&P 500-like returns, plus enhanced total returns, from actively managed fixed-income investments. The portfolio primarily invests in equity index derivatives to gain exposure to the S&P 500, combined with investment-grade dollar-denominated fixed-income securities. The strategy will be managed by managing directors Steve Kreider and Neil Stone. Messrs. Kreider and Stone will also work with MSIM's interest-rate, mortgage and credit fixed-income teams on the strategy.

    Reconstitution to add 237 companies to Russell 3000 index

    TACOMA, Wash. — In the annual Russell index reconstitution, 237 companies will be added to the Russell 3000 index, led by 43 health care companies, 39 consumer discretionary companies and 36 technology companies, according to a news release from Russell.

    "Turnover is always low in the broad-market Russell 3000, and it is expected to be similar to prior years at around 2.5% this year," Lori Richards, director of client service for Russell indexes, said in the release.

    As a result of the reconstitution, which will take place June 30, the consumer discretionary and services sector is expected to increase to 14.9% of the Russell 300 from 13.7%, and the integrated oils sector is expected to decline to 4.8% from 5.2%. The financial services sector will remain the largest segment with a weighting of 22%.

    According to a report from Goldman Sachs, the consumer discretionary sector is expected to receive the highest inflows because of the rebalancing, with an estimated $1.5 billion expected to move into companies in that sector. Integrated oil companies are expected to see the highest outflows, $800 million.

    Goldman analysts expect few style reversals for large capitalization companies, but Procter & Gamble is likely to shift to 79% value from 100% growth, and Hewlett-Packard to 39% value from 100% growth.

    S&P introduces series of industry indexes

    NEW YORK — Standard & Poor's today launched 15 industry indexes, according to Srikant Dash, an index strategist at the firm. The company already had three industry indexes.

    "We've had broad-based sector indexes for quite a while, and we've seen fund advisers and risk managers demanding narrower products," Mr. Dash said, adding that the company worked with State Street Corp. to develop the indexes.

    State Street will launch exchange-traded funds on six of the indexes the week of June 26, but Mr. Dash declined to name them. State Street officials were not available for comment.

    The new indexes cover industries including: aerospace and defense, building and construction, computer hardware, computer software, health care equipment, health care services, leisure time, metals and mining, oil and gas equipment and services, oil and gas exploration and production, outsourcing and IT consulting, pharmaceuticals, retail, telecom and transportation.

    Lloyds TSB embarks on plan to fully fund pension plans

    LONDON — Lloyds TSB Group will contribute £200 million ($367 million) a year to its two pension plans for about 10 years, until a £2 billion funding deficit calculated under FRS17 is plugged, according to a trading update released today.

    It has not been decided how the contribution will be invested, but it will likely be spread evenly among the current allocations of both plans: Lloyds TSB Group Pension Schemes No. 1 and No. 2, spokesman Lee Calder said.

    Lloyds had £13.2 billion in pension assets as of March 31, Mr. Calder said. About 64% is invested in equities, 23% in bonds, and the balance in real estate and cash, according to the company's 2005 annual report.

    Court allows ISE to trade options on 2 ETFs without license

    NEW YORK — International Securities Exchange Inc. can trade options on two exchange-traded funds — Standard & Poor's SPDRs and Dow Jones' DIAMONDS — without a license from the creators of those funds, according to a ruling by the 2nd Circuit U.S. Court of Appeals in New York. The court unanimously affirmed the U.S. District Court's earlier dismissal of claims by both S&P and Dow Jones that ISE's plans to list and trade options on SPDRs and DIAMONDS without a license infringed their intellectual property rights, according to a news release from the ISE. The ruling also cleared the Options Clearing Corp.

    ISE officials were not available for comment.

    "While we are disappointed with the Second Circuit's ruling, it is a narrow ruling that applies only to intellectual property rights associated with ETF-based options," said David Guarino, a spokesman for S&P, said in a statement. "The ruling has no impact on S&P's broader index business and associated intellectual property rights."

    Sybille Reitz, a spokeswoman for Dow Jones Indexes, also noted the court's narrow decision. "The decision explicitly makes clear that it does not permit unlicensed trading of derivative instruments that are linked directly to the value of an index," she said in a statement. "Dow Jones Indexes remains committed to defending its intellectual property rights with respect to use of its indexes in the creation of financial instruments."

    Funded status for 200 largest U.S. plans still at 86%

    NEW YORK — The 200 largest U.S. pension plans had a median funded status of 86% at the end of 2005, unchanged from the previous year, according to a survey by JPMorgan Asset Management. The median fund grew by 14.4% during 2005, while liabilities grew 11.6%. The best and worst funding levels also remained unchanged from 2004, at 115% and 67%, respectively. Additionally, JPMAM estimates that the median funding level will improve to 92% at the end of this year, in large part due to the rising interest rates increasing the discount rate used by corporate pension plans.

    State governments wrestle with retirement costs

    NEW YORK — Retirement costs are rapidly becoming one of the most significant financial burdens for states and localities, although rising costs will not affect all governments equally, according to a Merrill Lynch report released today.

    The report blamed demographic changes, stock market downturns in 2001 and 2002 and increased pension benefits for the climbing costs and increasing liabilities. Pension liabilities will increase as the baby boom generation retires and life expectancy climbs, the report said, while other post-employment benefits for states and localities far exceed similar costs for corporations.

    To combat the growing costs of retirement, states and municipalities will likely begin to examine funding mechanisms such as pension obligation bonds, tax hikes and special funds to divert any budget surpluses, the report said.

    Franklin Templeton launches REIT fund

    SAN MATEO, Calif. — Franklin Templeton Investments today launched the Franklin Global Real Estate Fund. It will be managed by Charles McKinely, REIT portfolio manager and analyst, and Jack Foster, managing director and head of global real estate for Fiduciary Global Advisors, a subsidiary of Franklin Templeton Institutional. The fund is available to institutional investors, as well as investors in employer-sponsored retirement plans, said Bill Weeks, spokesman.

    Russell 3000 value to rise by $1 trillion

    TACOMA, Wash. — The Russell 3000's overall market value will likely increase to $15.3 trillion when Russell Investment Group completes its annual index reconstitution on June 30, the company announced today. The market value of the Russell 3000 was $14.3 trillion a year ago. There are 237 companies that will move into the Russell 3000, more than last year's 208 additions but less than the 10-year annual average of 437. Companies being added this year include 122 IPOs, down from 159 in 2005. The final membership lists for the Russell 3000, Russell 2000 and Russell 1000 will be posted July 3.

    New Jersey slates review of investment plan

    TRENTON, N.J. — The New Jersey State Investment Council which oversees $75 billion in pension assets, will review an investment plan for the fiscal year ended June 30, 2007, at its next meeting, scheduled for July 20. According to a memo to the council from William G. Clark, director of the division, the investment plan will include continuing the move into alternative investments such as private equity, real estate and hedge funds; possibly changing the equity portfolios; and changing the benchmarks used for the domestic fixed-income portfolio to better mach the risk profile of the system's liabilities.

    Fidelity shifts $30B in mutual fund assets to MSCI Barra indexes

    BOSTON — Fidelity Investments will move about $30 billion in mutual fund assets to MSCI Barra indexes from both Standard & Poor's and Goldman Sachs indexes, confirmed Fidelity spokesman Mike Shamrell. Of the fund giant's 58 sector or industry-specific mutual funds, four will remain benchmarked to either S&P or Goldman Sachs indexes: the $1.54 billion Select Gold Portfolio, the $1.37 billion Select Natural Gas Portfolio, the $1.16 billion Select Natural Resources Portfolio and the $199 million Select Construction and Housing Portfolio. The changes are expected to take effect in the fourth quarter of this year.

    David Guarino, a spokesman at S&P, declined comment. Goldman Sachs spokesman Ed Canaday was not available by press time.

    Morgan Stanley shutters Private Markets III

    NEW YORK — Morgan Stanley Alternative Investment Partners closed its Morgan Stanley Private Markets Fund III with $1 billion in commitments, confirmed spokeswoman Erica Platt. The fund focuses on buyouts in North America and Europe, global venture capital and special situations. While the majority of the capital will be invested in private equity funds, roughly one-third will be in secondary interests and direct co-investments.

    GMP Capital unit buys private equity firm EdgeStone

    TORONTO — Griffiths McBurney, a subsidiary of investment bank GMP Capital Trust, is acquiring private equity firm EdgeStone Capital Partners in a $70 million deal scheduled to close in July, said spokeswoman Sarah Clarke, spokeswoman. The deal, announced June 16, includes management of the EdgeStone funds and a portion of the carried interest from the funds. Further details could not be learned by press time.

    Colorado PERA returns exceed 2005 benchmark

    DENVER — The Colorado Public Employees' Retirement Association returned 9.8% on investments in 2005, confirmed Katie Kaufmanis, spokeswoman. That is 200 basis points ahead of PERA's total fund investment policy benchmark. Overall, PERA's investment returns have averaged more than 10.9% annually during the past 25 years, according to a news release.

    Real estate returned 28.2% vs. 13.6% as of Dec. 31 for the system's custom benchmark; alternative investments were up 18.9% vs. 9.3% for the system's custom benchmark; international stocks gained 16.6% and domestic stocks returned 7%; bonds were up 2.8%.

    Legislation signed by Gov. Bill Owens on May 25 increased contribution levels to PERA to return the $34.9 billion plan to fully funded status, based on the actuarial assumption that investment returns will average 8.5% annually, along with other demographic assumptions, according to a news release. The plan's funded status was 73.3% at the end of 2005, Ms. Kaufmanis said.

    63% of 403(b) sponsors would opt to cut providers

    CHICAGO — Almost two out of three 403(b) plan sponsors — 63% — would rather reduce the number of bundled providers they work with than take on the extra work that will be required under proposed regulation, according to a Spectrem Group survey. The IRS has proposed that all 403(b) plans have written guidelines on aspects of their plans, including investment providers, investment transfer activity and loan provisions.

    Also, 57% of respondents said they're not at all likely to use a provider to handle the additional work or hire a third-party administrator or benefit consultant.

    Spectrem Group surveyed executives at 100 403(b) plans in May.

    PBGC won't name consultant linked to conflict claim

    WASHINGTON — The PBGC singled out but refused to identify the consulting firm named by the Securities and Exchange Commission as having conflicts of interests and having provided consulting services to a pension plan that was terminated and placed under PBGC control, according to a Pension Benefit Guaranty Corp. response to an inquiry by Reps. Edward Markey and George Miller released this week.

    "PBGC is aware of one such firm but is unable to provide further information because of confidentiality requirements imposed as a condition of its access to this nonpublic information," Bradley D. Belt wrote in a letter to the two congressmen in May while he was PBGC executive director. He left the agency on May 31.

    "There is not necessarily a connection between the failure to disclose conflicts of interest as found by the SEC and resulting harm to a pension plan," Mr. Belt noted in the letter.

    Messrs. Markey and Miller asked the agency in May to provide information on Wilshire Associates' consulting work for the PBGC and any terminated pension plans now under PBGC control. The request was made after Wilshire was subpoenaed by the Labor Department as part of its investigation into possible pension consultant conflicts of interest,

    "Wilshire has never served as a pension consultant to any pension plan that has terminated," Kim M. Shepherd, Wilshire managing director, said in a statement. "All Wilshire consulting clients receive a ‘conflicts check report' on at least an annual basis.

    "Wilshire consultants act objectively and in the best interests of all clients at all times. It is the policy of Wilshire Associates that all recommendations concerning portfolio managers made to investment consulting clients are based solely on the best interests of the client."

    Jeffrey Speicher, PBGC spokesman, said PBGC officials won't comment beyond confirming the letter.

    Fifth Third Asset creates liability-driven strategy

    CINCINNATI — Fifth Third Asset Management is offering a new liability-driven investment strategy that uses Treasury strips to immunize a pension plan's liabilities and then gains synthetic exposure to an alpha source such as an equity index, said Keith Wirtz, president and chief investment officer. Mitch Stapley, chief fixed-income officer, will manage the strategy.

    "The biggest risk for a pension plan is interest-rate risk," said Mr. Wirtz. "In this LDI strategy, we largely mitigate that risk. For the overlay portion, it could be an equity index that delivers a spread above those liabilities."

    Mr. Wirtz said the firm is in talks with several potential pension plan clients, which he declined to identify.

    Fifth Third has $22 billion in assets under management.

    Study: Overall SOX compliance cost down in 2005

    MILWAUKEE — The overall cost of complying with Sarbanes-Oxley corporate governance reforms in 2005 dropped 6% from the previous year for companies with more than $1 billion in revenues and 16% for companies with less than $1 billion in revenues, according to a study released June 15 by the law firm of Foley & Lardner. But audit fees, one component of the overall compliance cost, rose 22% in 2005 for small companies, 6% for midsized companies and 4% for S&P 500 companies.

    "Audit fees alone now represent more than 50% of out-of-pocket costs associated with Sarbanes-Oxley Act compliance for public companies with under $1 billion in annual revenue, up from 33% of such costs in the last year before the Sarbanes-Oxley Act was enacted in 2002," the study said.

    Reductions in the cost of overall compliance in 2005 "were driven by large decreases in costs associated with lost productivity, legal fees and initial corporate governance reform set-up," according to a statement about the study. "However, these decreases were largely offset by year-over-year increases in audit fees, directors and officers insurance and board compensation for companies of all sizes."

    Annual compensation for directors in 2005, excluding fees for attending meetings and committee assignments, rose 141% from the previous year for small and midsized companies and 11% for large firms, the study found. Between 2001 and 2005, annual director compensation was up 71%, 64% and 58% for small, midsized and large companies, respectively.

    The study was based on data from more than 850 proxy statements from public companies' 2005 fiscal year and responses from CEOs and other top executives of 114 public companies.

    Vermont proposal would create supplemental savings plans

    MONTPELIER, Vt. — Jeb Spaulding, Vermont state treasurer, and a group of state legislators plan to introduce a bill next January that would create a program in which small employers and self-employed people in the state could offer 401(k)-type retirement savings plans.

    "This is one possible way to piggyback onto our existing DC plan and help small businesses offer employer-based plans," Mr. Spaulding said in a telephone interview.

    The proposal would create a voluntary retirement savings program for employers and employees as well as self-employed people in the state. The program would be sponsored by the state and would use services of the state's existing defined contribution plans. Administrative costs would be covered by a fee paid by participants.

    Mr. Spaulding said he has presented the proposal to staff of Gov. James Douglas and "they're going to take a wait-and-see approach."

    Median U.S. plan funded status remains at 83%

    BOSTON — The median funded status of U.S. pension plans held steady at 83% in 2005, according to a new report from Mercer Human Resource Consulting and Mercer Investment Consulting.

    Frank Todisco, a senior consultant and actuary with Mercer Human Resource Consulting, said an 8.2% median investment return, combined with modest growth in plan liabilities — as measured by the net percentage increase in plan liabilities adjusted for new benefit accruals and benefit payments — accounted for the stable funded status.

    He added that pension plans, because of actuarial smoothing, are still feeling the effects of negative investment returns and falling interest rates from 2000 to 2002. Also, "the waters never quite calmed from the perfect storm of 2000-2002, and a second whammy is coming with new accounting rules and uncertainty about funding rules," Mr. Todisco said in a telephone interview.

    While Mercer expects more companies to freeze their pension plans or close them to new entrants, most companies in the S&P 500 index have not done so, he added.

    PBGC specifies liability formula for facility closures

    WASHINGTON — The PBGC published a new rule June 16 specifying how to calculate the liability generated when an employer ceases operations at a facility, confirmed spokesman Gary Pastorius. The rule, which codifies what had previously been a discretionary method of calculating liability, becomes effective July 16.

    It "will have little or no effect on calculation of the liability amount," according to a news release from the Washington-based agency issued June 15.

    The rule "reflects the PBGC's ongoing effort to streamline regulation and improve administration of the pension insurance program," Vincent Snowbarger, acting PBGC executive director, said in the release.

    In general, the facility closure liability is calculated by multiplying the total unfunded benefit liability by the percentage of total plan participants laid off as a result of the facility's closure. That amount is placed into escrow for the benefit of the plan and if the plan is terminated within five years, the payment is treated as a plan asset. If the plan is not terminated within that time, the payment is returned to the employer, according to the news release.

    Equibase Capital acquires, renames Cornerstone

    CHICAGO — Equibase Capital Group acquired real estate advisory firm Cornerstone Advisors, which will be renamed Equibase Capital Advisors, said John Tung, co-founder and managing director of Cornerstone. Terms were not disclosed. Mr. Tung will become a managing principal at Equibase Capital Advisors. "I sold to Equibase to associate with another firm and build something bigger and better," Mr. Tung said.

    AFL-CIO to finance construction, mortgages on Gulf Coast

    WASHINGTON — The AFL-CIO will finance $700 million in construction and mortgage loans in New Orleans and other Gulf Coast communities affected by Hurricane Katrina, according to a press release issued by the labor organization. The $3.6 billion AFL-CIO Housing Investment Trust and the $2 billion AFL-CIO Building Investment Trust will invest $250 million in housing construction and $100 million in commercial real estate.

    Judge upholds United pilot plan termination

    CHICAGO — The termination of United Airlines pilots' pension plan was upheld by a U.S. District Court judge in Chicago, according to court documents provided by the PBGC. The court's decision affirmed a 2005 ruling by the U.S. Bankruptcy Court in Chicago allowing the PBGC to take over the pilots' plan as part of United parent UAL Corp.'s plan for emerging from Chapter 11 bankruptcy protection. In February, United appealed that decision, claiming the bankruptcy court was not within its jurisdiction when it ruled to permit the termination.

    "The court concludes that the termination of the pilot plan is necessary to avoid an unreasonable increase in PBGC's liability," U.S. District Court Judge Joan Lefkow ruled. The PBGC had estimated it would lose roughly $84 million through June 2005 alone if the plan had continued to operate. While that amount represents only a small percentage of the plan's total assets, liability increases of much smaller amounts have been seen as grounds for termination in the past, Ms. Lefkow ruled.

    The PBGC has estimated the plan terminated effective Dec. 30, 2004, has $2.8 billion in assets and $5.7 billion in liabilities, and the agency expects to be liable for about $1.4 billion.

    United spokeswoman Jean Medina was not available for comment at press time. Dave Kelly, spokesman for the United arm of the Air Line Pilots Association, had no immediate comment on the ruling.

    Group wants firms to disclose financial risks of global warming

    WASHINGTON — Officials of 27 institutional investors, including the California Public Employees' Retirement System, Sacramento, and the Connecticut Retirement Plans and Trust Funds, Hartford, June 14 called on the Securities and Exchange Commission to require publicly traded companies to disclose financial risks of global warming in their corporate filings, according to a statement from the group.

    The investors, which represent $1 trillion in assets, faxed SEC Chairman Christopher Cox a letter urging him to enforce and strengthen existing disclosure requirements on material risks by providing interpretive guidance on the materiality of risks posed by climate change and to "require companies to include in their proxy statements shareholder proposals asking companies to report on financial risks due to climate change," the statement said.

    Climate change poses material financial risks to many of their portfolio companies, and those risks should be disclosed as a matter of routine corporate financial reporting to the SEC, the statement said.

    "Investors are not receiving the climate risk information from companies that is essential to their investment decision-making," Rob Feckner, chairman of the $200.2 billion CalPERS, said in the statement.

    "The SEC needs to treat this disclosure issue with the seriousness that it warrants because unresponsive regulations can lead to economic disaster," Denise L. Nappier, Connecticut state treasurer and principal fiduciary of the $23 billion Connecticut funds, said in the statement.

    FASB changes to benefit companies, says IASB chief

    WASHINGTON — FASB's proposed pension accounting reform will benefit companies by shedding light on a financial problem that can ruin them, David Tweedie, chairman, International Accounting Standards Board, testified June 14 before a hearing of the Senate Committee on Banking, Housing, and Urban Affairs.

    "We're not saying we have this exactly right," Mr. Tweedie said of the proposed rule change to better reflect the economic costs of funding pension benefits. "But I think this reform will save a lot of companies that would have gone into the mountainside. They will realize they weren't flying high enough."

    Robert H. Herz, chairman of the Financial Accounting Standards Board, testified the rule change may cause some companies to invest more in bonds and less in equities. "As a layman (in investing) matching may better secure benefits," he said.

    When Sen. Paul S. Sarbanes, D-Md., asked if FASB pension accounting changes has caused companies to terminate or threaten termination of their pension plans, Mr. Herz said: "There has been a pronounced flight over the last 20 years from defined benefit plans … long before we talked about doing anything with accounting."

    Both Messrs. Tweedie and Herz expect international accounting rules on pensions to converge and have the same rules applied globally in eight to 10 years.

    "In five years' time, the differences will be pretty small," Mr. Tweedie said.

    BNP Paribas to become full owner of Fischer Francis

    NEW YORK — BNP Paribas Asset Management will become the full owner of New York-based bond shop Fischer Francis Trees & Watts, confirmed Robin Meister, manager director and chief legal counsel at Fischer Francis. Terms were not disclosed. BNP Paribas is acquiring the 30% of the company it doesn't already own; those shares are owned by Fischer Francis' management and employees.

    Fischer Francis, which has $38 billion in assets under management, will remain an independently operated firm, said Ms. Meister. Philippe Lespinard, chief investment officer at BNP Paribas Asset Management, will become executive vice president and deputy chief executive of Fischer Francis. Mr. Lespinard, who will relocate to Fischer Francis' London office from Paris, will report directly to Stephen Casper, Fischer Francis' chief executive officer based in New York.

    The deal will allow Fischer Francis to expand its product offerings and use BNP Paribas' global distribution network, Ms. Meister said. Julie Benoit, BNP Paribas spokeswoman, could not be immediately reached for comment.

    Calamos adds to State Street fund service responsibilities

    NAPERVILLE, Ill. — Calamos Asset Management added to the duties of State Street Corp., which now will provide fund accounting for nine additional mutual funds and a variable insurance fund, all with a total of about $6 billion in assets, confirmed Jeff Kelly, a Calamos spokesman. State Street already handles fund services for 13 Calamos mutual funds.

    BAE Systems takes steps to plug £3.1 billion shortfall

    LONDON — BAE Systems is injecting £181 million ($332 million) in cash and £480 million in other assets this year to help close a £3.1 billion deficit in its four main U.K. pension plans, according to a news release. Another £426 million in cash will be contributed over the next 10 years to close the company's deficit by 2017 under IAS 19 accounting standards.

    Spokeswoman Lisa Hillary-Tee said most of the £181 million has already been transferred and "will be invested in line with current asset allocation strategy…"

    BAE Systems had £10.8 billion in pension assets as of Dec. 31 in BAE's four schemes: Main, 2000 Plan, Royal Ordnance and Shipbuilders. The plans are based in Farnborough, England.

    Also, the company gradually increased its share of pension contributions for existing employees in the Main Pension Plan to 18.21% of their annual salaries, from 11.7%; the £642 million gained will go toward the deficit. Employee contributions were increased to 9.29% of their annual salaries, from 5%.

    FASB balance sheet proposal could cause contract breaches

    NEW YORK — FASB's proposal to place unfunded pension liabilities on corporate balance sheets could lead to breaches in lending covenants at some companies because of the resulting reduction in shareholder equity value, Louise Purtle, senior analyst-macro strategy at fixed-income research firm CreditSights, said in a webcast for clients June 13. However, competitive lending markets will permit companies to negotiate waivers or refinancing and make it unlikely financing would suffer, she added.

    The Financial Accounting Standards Board expects by the end of the year to adopt its proposal to require companies to recognize the funded status of pension plan in their financial statements.

    Ms. Purtle said more than 80% of S&P 500 companies with defined benefit plans are underfunded by an average of $407 million in 2005, down from $463 million in 2004. Total pension underfunding of S&P 500 companies with defined benefit plans is $139.5 billion, or 1.2% of their market capitalization.

    Ontario, Arkansas plans settle with Williams

    TULSA, Okla. — Ontario Teachers' Pension Plan and Arkansas Teacher Retirement System agreed to a $311 million cash settlement in a securities class action against The Williams Cos., its directors and officers, its auditor, and its underwriters, according to an announcement from the C$96 billion (US$83.6 billion) Ontario fund.

    "This recovery is an excellent example of the positive impact that institutional investors can have in securities class actions," said Claude Lamoureux, president and chief executive officer of the Ontario fund, said in a statement.

    The Ontario fund and the $8 billion Arkansas fund, Little Rock, were co-lead plaintiffs in the lawsuit. The trial was scheduled to begin Aug. 16 in U.S. District Court in Tulsa, said Chad Johnson, partner of law firm Bernstein Litowitz Berger & Grossmann, which represents the lead plaintiffs.

    "It's a terrific settlement," Mr. Johnson said in an interview, noting the amount ranks among the top 15 securities class-action settlements of all time.

    The settlement agreement is expected to be filed July 24 with U.S. District Judge Stephen Friot for preliminary approval and to notify the members of the class, so they can file any objection to the agreement, Mr. Johnson said. The $311 million will be designated for distribution to investors eligible for a claim of the settlement, he said. It is too early to say how much the Ontario and Arkansas funds will share, he said.

    The plans alleged in the complaint, filed in 2002, that the company misrepresented its financial condition by failing to provide timely disclosure of a multibillion-dollar loss and inflated valuations of some contracts, the statement said.

    Williams did not admit "to any liability by the company, its directors or officers," according to a statement. "In addition, there were no findings of any violation of federal securities laws."

    "The settlement will be funded through a combination of insurance proceeds and cash on hand, and will not have a material effect on the company's liquidity position," the company statement added.

    Tyco fraud suit becomes class action

    CONCORD, N.H. — A lawsuit against Tyco International Ltd. filed by several pension funds was certified as a class-action June 13 by U.S. District Judge Paul Barbadoro in Concord, N.H. Among those named as lead plaintiffs are the $12.8 billion Teachers' Retirement System of Louisiana, Baton Rouge; the $7.3 billion Louisiana State Employees' Retirement System, Baton Rouge; and the $3.8 billion Plumbers and Pipefitters National Pension Fund, Washington. However, Mr. Barbadoro removed plaintiff Voyageur Asset Management from the case, saying it couldn't prove it suffered losses.

    The suit, filed in 2002, accuses former CEO L. Dennis Kozlowski, former CFO Mark H. Swartz and other former executives and directors as well as the company and auditor PricewaterhouseCoopers of accounting and securities fraud. A trial date hasn't been set, said Allan Ripp, spokesman for the law firm of Grant & Eisenhofer, which is representing the plaintiffs.

    The other lead plaintiffs certified by the judge are the United Association General Officers Pension Plan, United Association Office Employees Pension Plan and United Association Local Union Officers & Employees Pension Fund, all based in Virginia.

    Texas Prepaid Higher Ed renews NEPC contract

    AUSTIN, Texas — The Texas Prepaid Higher Education Tuition Board renewed its contract with New England Pension Consultants for one year beginning Sept. 1, according to a posting on the Texas Building and Procurement Commission website. The $1.6 billion program's contract with NEPC, which ends Aug. 31, includes an option for two consecutive one-year renewals. The contract is not to exceed $155,000 in fees for the year, according to the posting.

    Chief risk officers' total compensation up 28% for year

    NEW YORK — Total compensation for chief risk officers at asset management firms averaged $795,000 in 2005, 28% higher than the $620,000 they averaged in 2004, according to a compensation survey of asset management firms by executive recruiter Risk Talent Associates. The growth was driven primarily by cash and non-cash bonuses: Cash bonuses averaged $245,000 in 2005, just 2% higher than the prior year, while non-cash bonuses doubled to $230,000.

    Mellon: Typical plan's liabilities down 7.5% so far in '06

    BOSTON — The typical U.S. pension plan's liabilities fell by 7.5% on average in the first five months of the year, according to Peter Austin, executive director of Mellon Pension Services, a unit of Mellon Financial Corp. "That's attributable to about a 75-basis-point move in interest rates" as measured by the Moody's double-A bond yield, he said in a telephone interview. "It also has something to do with appreciation on asset allocations."

    According to data from Mellon, assets of a moderate-risk benchmark portfolio — split roughly 60/40 between the Russell 3000 stock index and the Lehman Aggregate bond index — gained 2.2% in the five months ended May 31.

    Mellon splits pension funds into three categories: mature, typical and young, Mr. Austin said. Because the duration of mature pension plans is shorter, the liabilities of those plans fell by only 4.9% over the first five months of the year. Liabilities of young plans fell by 10.1% over the same period.

    "The near-term future is somewhat opaque," he said, noting that uncertainty over interest rates and the economy have increased volatility in financial markets. "Because of that, many plan sponsors we talk to are saying: ‘we know that if we take a portion of our portfolio and match the duration of our liabilities, we're going to immunize a portion of that and lock that in,' shielding them from the whipsaws of the market."

    MSCI Barra to introduce 2 China-targeted index groups

    NEW YORK — MSCI Barra plans two new value and growth index groups for the China A-share market, according to Remy Briand, global director of core equity research at the firm. The MSCI China A value and growth indexes and the MSCI China A absolute value and absolute growth indexes are scheduled to be launched in July.

    "These indexes are primarily targeting domestic mainland China investors," Mr. Briand said in a telephone interview. "The constraints into accessing the Chinese market for international investors are still very big. This market is still pretty much a non-investible market.

    "But within China, there is a lot of demand for variance or style indexes, and that's why we're launching these two series," he said. "They are both multifactor and also exhaustive indexes."

    In constructing the indexes, MSCI officials use buffer zones between the styles to reduce turnover caused by the temporary move of securities from one style to the other.

    Yale creates corporate governance center

    NEW HAVEN, Conn. — The Yale University School of Management established the Yale Center for Corporate Governance and Performance and named Ira M. Millstein director, according to a statement from the school. Mr. Millstein is a senior partner at the law firm of Weil, Gotshal & Manges and senior associate dean for corporate governance at the Yale School of Management; he also teaches competitive enterprise and strategy at the school.

    The center's initial project will examine how shareholders exercise their fiduciary responsibilities as shareowners, such as participating in proxy voting and engaging in active corporate governance, Mr. Millstein said in an interview. Other activities will examine proxy-voting advisory companies and their work and role in corporate governance. The center is dedicated broadly to examining the role and responsibilities of corporations in society, he said.

    The center's 33-member advisory board includes Elliot Schrage, vice president-global communications and public affairs, Google Inc.; Patrick J. Canavan, senior vice president-global governance, Motorola Inc.; Herb Allison, chairman president, and CEO, TIAA-CREF; William Donaldson, former SEC chairman; Harvey Goldschmid, former SEC commissioner and currently a professor at Columbia University Law School; and John C. Bogle, founder and former chairman of Vanguard Group.

    Startup financing for the center will come from $20 million in gifts and commitments from individual and corporate donors, including a $10 million gift from David Nierenberg, president, Nierenberg Investment Management, and his wife, Patricia, the statement said. The donation, the single largest gift in the history of the Yale School of Management, will support the David Nierenberg Fund for Corporate Governance and Performance and the Theodore Nierenberg Professorship in Corporate Governance.

    10 firms with lower CEO pay outperform peers, study shows

    PORTLAND, Maine — Ten companies whose CEOs each earned less than $30 million for the last two available fiscal years had a greater than 100% return to stockholders over the last five years and outperformed their peers over the same period, according to a new study released June 12 by The Corporate Library. In total, "the companies awarded only $190 million in pay to the CEOs, who presided over … $82.7 billion in gains," a statement about the study noted.

    The companies are AutoNation Inc., AutoZone Inc., Express Scripts Inc., Franklin Resources Inc., Humana Inc., NCR Corp., Nordstrom Inc., Nucor Corp., The Progressive Corp. and Whole Foods Market Inc.

    "What these compensation committees have achieved is not rocket science," Paul Hodgson, TCL senior research associate and an author of the report, said in the statement. "The difference is that they have not been led by the market, but rather have looked inwards to see what would work for them, not just doing what everyone else is doing because everyone else is doing it. Compensation policy is remarkably disparate at the companies."

    TCL rated each of the 10 companies as low in corporate governance risk.

    Swedes add to ABN AMRO foreign currency portfolio

    STOCKHOLM — The Swedish National Debt Office added 2 billion Swedish kronor ($280 million) to a foreign currency portfolio run by ABN AMRO Asset Management, bringing its total to 8 billion kronor, confirmed SNDO spokeswoman Marja Lang.

    The Debt Office, which is the treasury of the Swedish government and is responsible for 200 billion kronor in assets, increased the size of ABN AMRO's portfolio because of consistently "good results" over the past three years, Ms. Lang said. She declined to provide further details. BlackRock, Bridgewater Associates, Goldman Sachs Asset Management and PIMCO are the other external managers, each one managing 6 billion kronor, she said. Further information could not be learned by press time.

    Nova Scotia to create new DB plan for school, library board members

    HALIFAX, Nova Scotia — The Nova Scotia Pension Agency is creating a new defined benefit plan, the Public Authorities Pension Plan, to cover 6,500 employees from school and library boards. The agency is looking for an actuary to help create the plan, and provide actuarial services, according to its website. Sheila Bourque, procurement consultant, did not return calls seeking additional information. A selection is expected Sept. 15.

    PPF mulls adding investment strategy as risk factor

    LONDON — Executives at the U.K.'s Pension Protection Fund will begin talks with pension industry representatives in the next month to consider including investment strategy as a risk factor when calculating plan sponsor levies paid to the fund, the U.K. equivalent to the PBGC, said Lawrence Churchill, PPF chairman.

    If investment strategy is to be included in calculating plan sponsor levies, it wouldn't be implemented for at least two years, Mr. Churchill said June 8 in London addressing delegates at the annual conference of the National Association of Pension Funds.

    So far, 73 pension plans with collective liabilities of £2 billion ($3.72 billion) have been assessed for possible inclusion in the PPF since it was launched in April 2005. The initial assessment period prior to rescue by the fund takes around one year, and it is unclear at this stage how many of those plans will be put in the fund.

    The PPF will announce the level of fund assets in the fall, and how they will be invested, added Mr. Churchill.

    Presidio: Traditional portfolio bests average hedge fund of funds

    SAN FRANCISCO — A diversified traditional portfolio would have achieved better investment results than the average hedge fund of funds from January 1990 to March 2006, according to analysis by Presidio Financial Partners, a wealth management firm.

    Presidio compared a model passive portfolio (comprising 40% bonds, 20% U.S. large-cap equities, 15% international equities, 10% U.S. small-cap equities, 10% high-yield bonds and 5% emerging market equities), which would have returned 10.6% for the same period, with the 10.1% return of the HFRI Funds of Funds index. The difference was more marked over a shorter time period — April 2000 to March 2006 — when the model portfolio returned 6.3%, compared with 5.2% for the index.

    Blackstone shutters 5th real estate fund

    NEW YORK — Blackstone Group closed Blackstone Real Estate Partners V at $5.25 billion, said John A. Ford, spokesman. The fund had no target, he said.

    Investors in the fund include the $80 billion New York State Teachers' Retirement System, Albany; $74.7 billion New Jersey Division of Investment, Trenton; and $52.2 billion Minnesota State Board of Investment, St. Paul.

    Vanguard builds target-based lineup

    VALLEY FORGE, Pa. — The Vanguard Group launched five age-based target retirement funds, said John Demming, spokesman. Vanguard now offers 11 target retirement funds.

    UBS moves alternatives business to Dillon Read

    CHICAGO — UBS moved its commercial real estate, principal finance and credit arbitrage strategies and teams to subsidiary Dillon Read Capital Management, confirmed Doug Morris, UBS spokesman. Dillon Read was resurrected last year to manage hedge funds for the Swiss bank, under John Costas, who had headed UBS' investment banking activities. Mr. Morris said Dillon Read will launch investment vehicles but he could not provide a timeline because the firm is subject to a regulatory "quiet period."

    CAI opens portable alpha investment center

    NEW YORK — Citigroup Alternative Investments created a formal portable alpha investment center and will launch a Cayman Islands-based multistrategy hedge fund in August, according to an internal memo by Dean S. Barr, managing director and head of liquid investments. The fund will invest in a "wide variety of CAI strategies while actively hedging out certain bets," according to Mr. Barr's memo. CAI will offer the Portable Alpha Fund as a stand-alone vehicle and as the core alpha engine for other investment strategies, including leveraged versions of the fund and structured products.

    PennPSERS, Iowa Public announce returns

    The Pennsylvania Public School Employees' Retirement System, Harrisburg, returned 17.93% on its investments for the year ended March 31, according to a news release from the $57 billion system. The returns were largely driven by PennPSERS' international and domestic equity portfolios, which returned 31.49% and 14.77%, respectively, during the 12-month period, as well as its real estate portfolio, with 37.79%, and alternative investments, 21.86%. PennPSERS had 41.2% of its assets in U.S. equities, 23.6% international equities, 17.1% fixed income; 8.3% in fixed income, 6% in real estate and 3.8% cash and cash equivalents at the end of March.

    Separately, the Iowa Public Employees' Retirement System, Des Moines, outperformed its customized benchmarks with returns of 11.22% for nine months, 14.16% for 12 months, and 9.71% for 10 years, all ended March 31, according to a report from the $20.49 billion fund. Those compare to the fund's benchmark returns of 10.21%, 13.17% and 8.96%, respectively.

    The system's three-year return of 15.58% and five-year return of 7.47% underperformed the benchmarks, which were 15.89% and 7.96%, respectively, for the same periods.

    Credit Suisse to use Paladyne

    NEW YORK — Credit Suisse Group will use Paladyne Systems to provide hedge fund front-, middle- and back-office systems to Credit Suisse clients using multiple prime brokers, according to Scott Alderson, president of Paladyne.

    "A lot of hedge funds are married to a single prime broker," and adding another requires a hedge fund to spend a significant amount of money and hire additional staff, Mr. Alderson said. "Credit Suisse wanted to find out if there was a way to offer a full front-to-back solution that would support clients that have multiple prime broker relationships." Through this deal, "Credit Suisse can offer our platform to their customers, but the platform doesn't exist within the four walls of Credit Suisse, so privacy is maintained."

    Mr. Alderson said Paladyne officials had been talking with three or four other prime brokers, which he declined to name, "but Credit Suisse was the one that reacted the fastest and wanted it most."

    Credit Suisse is paying Paladyne a licensing fee. Mr. Alderson said the firm wanted to take an equity stake in Paladyne, "but that was a deal breaker for us."

    More hedge funds are beginning to use multiple prime brokers because it gives them greater access to markets, financing, stock lending and other services, he said.

    Credit Suisse spokeswoman Mary Claire Delaney said company officials were not available for comment.]

    Dow Jones creates BRIC 50 index

    The Dow Jones BRIC 50 index, which measures the performance of the 50 largest companies in Brazil, Russia, India and China, was introduced June 7, said Sybille Reitz, spokeswoman. The index comprises 15 companies each from Brazil, India and China and five from Russia. Each component's weight is capped at 10% of the index's total free-float market capitalization, and the index will be reviewed annually in September.

    Ms. Reitz said Dow Jones expects to license the index to firms in Europe soon for use in structured products and ETFs, followed by firms in the U.S. "You can expect to see products in Europe quite quickly," Ms. Reitz said, although no licensing agreements have been signed.

    State Street Global Advisors creates hedge fund unit

    BOSTON — State Street Global Advisors created a new unit, State Street Global Advisors Capital Management Trust, and moved all its hedge fund strategies — with assets totaling $4 billion — to the independent subsidiary. Jane Tisdale is president of the new firm; she had been managing director of hedge fund strategies at SSgA.

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    December 12, 2022 page one

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