NEWS BRIEFS: U.S. endowments average 10.7% return for FY 2006

U.S. endowments averaged a 10.7% return on investments for the fiscal year ended June 30, compared with 9.3% for the previous year, according to preliminary annual survey data from the National Association of College and University Business Officers. The increase may be related to higher alternative investment allocations: On average, endowments of all sizes allocated 9.6% of assets to hedge funds as of June 30, compared with 8.7% the year before. The average real estate allocation increased to 3.5% from 3.1% a year earlier; private equity increased to an average 1.9% from 1.6%; and natural resources investments averaged 1.5% compared with 0.9% in 2005. By contrast, the average equity allocation dropped to 57.7% of assets this year, from 58.5% in 2005, and fixed income dropped to an average 20.2% from 21.5% for the same period.

The National Endowment Survey, conducted by TIAA-CREF on behalf of NACUBO, asked 765 U.S. and Canadian endowments to provide information about their investments as of June 30. The final report will be available in January.

DENVER — The Denver Employees Retirement Plan named Copper Rock Capital, Essex Investment and NorthPoint Capital as finalists in its search for an active domestic small-cap growth equity manager, said Steven Hutt, executive director of the $1.9 billion fund. The size of the portfolio has not been determined. The selected firm will either support the system's two existing active domestic small-cap growth managers, Fiduciary Global Advisors and Neuberger Berman, or replace Fiduciary because of concerns about performance and staff turnover. Bill Weeks, Fiduciary spokesman, declined to comment. Fiduciary and Neuberger run $75 million each. The fund will conduct interviews with the finalists and possibly make a selection at a Jan. 19 board meeting, Mr. Hutt said. Callan Associates is assisting.

FORT WORTH, Texas — American Airlines Inc. contributed $100 million to its $7.8 billion pension plans on Dec. 11, bringing its total contribution this year to $323 million, according to Andy Backover, spokesman for the airline. The company expects to contribute about $364 million to the plans in 2007.

HOUSTON — Continental Airlines Inc., Houston, plans to contribute $300 million to its pension plans in 2007, according to an 8-K filing. The company's estimated minimum contribution for 2007 is $180 million. Continental has contributed $246 million to its pension plans in 2006. The company had $1.4 billion in pension assets as of Dec. 31, according to its 2005 annual report.

CHICAGO — The National Foreign Trade Council's lawsuit against the state of Illinois, challenging the constitutionality of a state law requiring public pension funds to divest all companies connected with Sudan, is scheduled for oral arguments in U.S. District Court in Chicago on Jan. 3. The NFTC has filed a motion asking for a preliminary injunction halting the enforcement of the law until the case is adjudicated, said J. Daniel O'Flaherty, vice president. Judge Matthew F. Kennelly expects to rule on the injunction and the overall case before Jan. 27, the date Illinois' public pension funds have to begin compliance by having divested 60% of Sudan investments, Mr. O'Flaherty said. Winston & Strawn is representing the NFTC. The suit was filed by the NFTC and a number of municipal police and fire pension funds last August. Defendants are the attorney general, state treasurer and secretary of the Illinois Department of Financial and Professional Regulation. The AG's office is handling the defense/ The law requires state public funds to completely divest Sudan-related holdings by July 27.

CHAMPAIGN, Ill. — Illinois State Universities Retirement System added a global mandate to two active real estate investment trusts run by RREEF America and ING Clarion and to a passive REIT run by Barclays Global Investors, said Dan M. Slack, executive director of the $14.9 billion system. For RREEF and ING Clarion, the system will transfer $88 million each to global portfolios from domestic, leaving them with $192 million and $162 million in domestic mandates, respectively. For BGI, the system will transfer $32.5 million to global from domestic, leaving it with $121.5 million. "We had a wonderful run with domestic REITs, but we feel it's important to be diversified internationally," Mr. Slack said. "We like the global mandate (as opposed to international) because it allows the managers to make the decision on where is the best opportunity, in the U.S. or internationally," he said. Ennis Knupp assisted.

SAN DIEGO — The $7.6 billion San Diego County Employees Retirement Association's unfunded liability decreased to $1.2 billion as of June 30, down from $1.4 billion the year before, according to a recent actuarial valuation. The fund's rate of return increased to 14.98% from 14.21% during the same period, said Brian White, CEO.

NEW YORK — Lehman Brothers reported $225 billion in assets under management as of Nov. 30, the end of the company's fiscal fourth quarter, according to a news release. Lehman's assets increased by 8.7% for the quarter and 28.6% for the year, due primarily to a 26.7% increase in equity assets to $95 billion for the year, and a 65.6% increase in money market assets to $48 billion for the year. Overall, Lehman's investment management unit reported $640 million in net revenue, the highest ever in a single quarter, up 5.8% from the previous quarter and up 25.7% from the same time last year. The fourth-quarter revenue increase was largely due to the asset management business, which produced net revenue of $368 million during the quarter, up almost 40% from the fourth quarter of last year. Separately, Bear Stearns reported $52.5 billion in assets under management for its fiscal fourth quarter ended Nov. 30, a 4.6% increase from the end of the previous quarter, according to a news release. For the year, Bear Stearns' assets increased by 25.2%. The growth in the firm's asset management business came from alternative investments, which also contributed to a record level of annual net revenue for the group. Bear Stearns posted $332 million in net revenue during fiscal 2006, a 45% increase from last year, due to the growth in alternatives along with increased performance fees. Also, Goldman Sachs had $676 billion in assets under management at the end of its fiscal year, ended Nov. 24, a 7.5% increase from the end of the previous quarter, according to an SEC filing. The firm's equity assets under management increased by 11% to $215 billion in the quarter ended Nov. 24, making up a significant portion of the overall fiscal year increase. For the year, Goldman's assets under management increased by 27%, with much of the growth coming from alternative investments, which increased 32% to $145 billion at year's end, while equity and fixed-income assets increased by 29% to $215 billion and $198 billion, respectively. For the latest quarter, Goldman's revenue from asset management were $933 million, a 2% increase from the previous quarter and a 19% increase from a year earlier.

WASHINGTON — Fifty-seven percent of adult U.S. workers have saved less than $100,000 for retirement, while 28% have saved less than $10,000, according to a survey released Dec. 14 by the Commission on the Regulation of U.S. Capital Markets in the 21st Century. The survey also said 29% of working adults think they will need to postpone retirement because they lack sufficient savings, while 46% think they will not have enough money to maintain their standard of living during retirement, according to a news release announcing the survey results. The release also said 52% of working women and 39% of working men are uncomfortable about making their own retirement savings decisions, while 23% of working adults say thinking about saving for retirement frightens them. "The commission's data highlights the distressing fact that many working Americans are unprepared for retirement, concerned and scared about their ability to retire, but still expecting to retire by the age of 65," Peter Gilbert, a commission member and CIO of the $30 billion Pennsylvania State Employees' Retirement System, said in the news release. The commission was formed by the U.S. Chamber of Commerce to study ways to ensure efficient capital flows in the U.S. economy. Harris Interactive conducted an online survey of 1,577 employed adults 18 and older Nov. 7-9, according to the release.

WASHINGTON — The PBGC sold almost 9.3 million of the 12.6 million shares of UAL Corp. stock the agency received when it took over United Airlines' four pension plans, according to an SEC filing. The plans had assets of $7 billion but were underfunded by $9.8 billion when the PBGC announced that it was taking over United's pension plans in 2005, according to the PBGC.

WASHINGTON — James Barlow Smith, former vice president of equity trading at Advanced Investment Management, agreed to a one-year ban from serving as an investment adviser as part of a settlement with the Securities and Exchange Commission. According to an SEC news release, Mr. Smith was also ordered to pay a civil penalty of $55,000. The SEC accused Mr. Smith of helping make unauthorized trades for the firm in 2002 that resulted in more than $415 million in losses for pension funds and other investors. The firm shut down later that year. Mr. Smith could not immediately be reached for comment.