NEWS BRIEFS: Former BKF CEO moves to Grail

NEW YORK — John Siciliano joined Grail Partners as a partner, said Donald H. Putnam, managing partner with the investment bank that focuses on the investment management industry. Mr. Putnam said Mr. Siciliano will bolster Grail's lineup for what promises to be a busy year for mergers and acquisitions and for the private equity transactions in which Grail invests. Mr. Siciliano was chairman and CEO of BKF Capital Group for the last year and a half.

BATON ROUGE — The $1 billion Baton Rouge & Parish of East Baton Rouge Retirement System is reviewing a shortlist of managers in its invitation-only search for a firm to run $30 million in an active emerging markets commingled fund, said Jeff Yates, retirement administrator. He declined to identify the firms. Fund officials will make a selection by early February. Funding will come from a general redistribution of assets. The plan's consultant, Summit Strategies Group, recommended adding the investment for diversification.

Separately, the board chose not to follow a recommendation made by Summit to invest in hedge funds, Mr. Yates said. "The board is just not comfortable with them because of lack of regulation and transparency," he explained. "Hedge funds and private equity are not things the board is looking to get into right now."

LONDON — Total U.K. pension deficits decreased an estimated 43% in 2006 to £41 billion ($80.6 billion), according to an Aon Consulting study of the U.K.'s 200 largest pension funds. The improvement was largely attributed to strong U.K. equity returns and rising bond yields. Roughly a quarter of the pension funds studied are expected to see at least an 8% improvement in their funding levels, although some will see a deterioration as they close off their 2006 accounts, according to the study.

"Companies with high exposures to U.K. equity are likely to see significant improvements in their deficits for 2006, while those with high bond or overseas equity exposures could see no improvement at all, particularly if they are also revising their life expectancy assumptions," Andrew Claringbold, principal at Aon, said in the report. "It will be interesting to see whether those companies that have benefited significantly from the favorable U.K. equity returns over 2006 will maintain their exposure to this market or decide that now is the time to reduce risk."

Tesco PLC, Cheshunt, England, formed a real estate joint venture with British Airways Pension Fund, Hounslow, England, to implement a sale-and-leaseback transaction covering 16 stores, Tesco spokesman Tom Siveyer confirmed. The 50/50 joint venture would use mostly debt financing to purchase 2% of Tesco's U.K. real estate assets at an estimated £445 million ($859 million). Tesco would then pay rent on the properties to the joint venture, which would provide British Airways' £10 billion pension fund with a relatively consistent cash inflow over a scheduled period of 20 years.

"Pension funds normally invest outright in property, so it is innovative and unusual for a pension fund to be the counterparty to a sale and leaseback," Claire Milton, spokeswoman for the London-based National Association of Pension Funds, said in an e-mail response. "Normally it's financial institutions that are the counterparty of sale and leasebacks."

The transaction was the first in what is expected to be a wider program involving about £5 billion in real estate assets over the next five years. Initial returns are estimated at about 4.4%, according to Mr. Siveyer. John Birch, British Airways' pension fund manager and secretary, could not be reached by press time.

PITTSBURGH — Mellon Asset Management launched its first series of target maturity funds, said Michael Dunn, spokesman. The company already offers risk-based lifestyle funds. The new portfolios are designed to increase returns by including a component that takes long and short positions in global stock, bond and currency markets, he said.

SANTA FE, N.M. — New Mexico Educational Retirement Board hired State Street Global Markets to run its first commission recapture program, said Frank C. Foy, CIO of the $8.9 billion fund. The program is new.

FLORHAM PARK, N.J. — GSC Group closed GSC Recovery III, a midmarket distressed debt fund, at $530 million. Investors include the $13.5 billion New Mexico State Investment Council, Santa Fe. GSC also committed $50 million to the fund.

BOSTON — Sowood Capital Management will split off its private equity management business into a new firm called Denham Capital Management, according to a news release. Sowood will continue to manage hedge fund assets in the Sowood Alpha Funds. Company officials expect Denham to be fully independent of Sowood as of July 1, when Sowood's Commodity Partners private equity funds will be renamed the Denham Commodity Partners Funds. Denham will have about $2.3 billion in private equity investments and commitments at inception.

Megan Kelleher, managing partner at Sowood, was not available for comment at press time.

LONDON — Schroders will pay €28 million ($36.6 million) to acquire German property specialist Aareal Asset Management in a transaction that would boost Schroders' real estate assets under management by 17%, to €13.2 billion, according to a news release. The deal is "an excellent fit" for Schroders, which seeks to exploit investor demand for pan-European real estate, William Hill, Schroders' head of property, said in the release. The fund manager now has €11.3 billion in real estate assets under management.

The deal also includes about €21.4 million in real assets that are part of the investments of the underlying funds managed by Aareal. In addition, Schroders has the option of acquiring another €29.8 million in real assets if Aareal's parent company, Aareal Bank, does not sell them by March 31.

Schroders spokesman Nik Ekholm could not be reached for further comment at press time.

NEW YORK — Asset Management Finance announced it has made an investment in International Foreign Exchange Concepts Inc. in return for a time-limited share of the firm's revenue. Company officials declined to provide further details. The deal with FX Concepts, which manages $12 billion in currency assets for U.S. investors, is the fifth since industry veteran Norton H. Reamer launched AMF three years ago to provide "non-intrusive" financing for money management firms looking to fund expansions or generational transfers without surrendering equity.