Corporate pension executives concerned about volatility
BOSTON Roughly 40% of corporate defined benefit executives say volatility to financials is their top concern following recent and potential changes to pension legislation and accounting rules, according to a survey from Pyramis Global Advisors. The concern is fueled, in large part, by the possibility that the Financial Accounting Standards Board could soon move to a mark-to-market accounting standard that would have a significant impact on corporate income statements, said Peter Chiappinelli, senior vice president. As a result, many of the 124 corporate executives surveyed said that they have begun using, or are considering, risk management strategies such as liability-driven investment. According to the survey, 17% of respondents are already using LDI strategies, while 34% are seriously considering it. They are also relying more on investment strategies including 130/30 strategies, non-U.S. equity and real estate to improve their overall investment performance; 63% of respondents said they are using or considering 130/30 strategies, while 20% said they will increase their non-U.S. equity allocations and 19% will boost real estate. Pyramis also polled 90 public pension plan officials, and more than half reported that a low-return environment was their greatest current concern. Over the next five years, respondents said they expect the U.S. equity markets to return 8.5%; international equities, 9.2%; and fixed income, 5% to 5.5%. This has prompted about 80% of the public plan officials polled to use or consider portable alpha programs as well as international equity strategies.
Texas Teachers adds to private equity commitment
AUSTIN, Texas The Teacher Retirement System of Texas will commit up to $300 million to private equity as part of its emerging manager initiative, the board decided at its Feb. 8-9 meeting. The funds total commitment to new and emerging managers is $550 million, or approximately 13% of the overall private equity allocation, spokeswoman Juliana Helton said.
The board of the $107 billion fund also agreed to retain the programs current manager, Credit Suisses customized funds investment group, to implement the investment strategy. Potential asset allocation changes were discussed at the meeting, including a possible increase in the funds overall private equity allocation, which totaled 2.3% as of Sept. 30. No formal recommendations were made, and no actions were taken by the board. Further consideration will be given at the April 12-13 board meeting, Ms. Helton said.
Illinois SURS to add $100 million to core fixed-income portfolio
CHAMPAIGN Illinois State Universities Retirement System, will increase Metropolitan West Asset Managements core fixed-income assignment by $100 million to a total of $310 million, said CIO Daniel L. Allen. The $15.3 billion fund hasnt decided on funding, although it could come from international equity, which at 20% is above its 18.5% target, he said. No managers will be terminated. Wisconsin considers bill forcing Sudan investment divestments MADISON State of Wisconsin Investment Board would be required to divest Sudan-related investments from its $90 billion in assets under a bill introduced Feb. 21 in the Legislature. The bill would require the fund to identify companies and divest all the holdings within 15 months of identification. Fund officials oppose divestment, contending it conflicts with SWIBs fiduciary responsibility to invest every dollar solely in the best interests of the trust funds, according to a statement by the fund. At the same time, while SWIB cannot make investments based on social or political objectives, it does consider the economic effects of social and humanitarian issues in the analysis of investments, the statement said. SWIBs guidelines prohibit direct investment in Sudanese companies and bonds, as SWIB similarly prohibits direct investment in other countries where the rule of law, civil liberties and other standards are not adequate to protect its investments, the statement said. SWIB requires its investment managers to annually certify that they are in compliance with a state administrative rule, which has the force of law, requiring SWIB to seek investments in organizations which respect basic human rights because such conduct is conducive to long-run success.
NY state comptroller wants more green investments
ALBANY New York state Comptroller Thomas DiNapoli is advocating that the New York State Common Retirement Fund increase its funding of environmental education and protection programs, confirmed spokesman Dan Weiller. Mr. DiNapoli is sole trustee of the $150 billion fund, which already funds small-business loan and affordable housing programs, among others. No further details were available at press time. Hedge fund impact eyed
The General Accountability Office was asked by Sen. Max Baucus, D-Mont., and Sen. Charles Grassley, R-Iowa, to investigate the impact that public and private pension plans hedge fund investments could have on plan participants, according to a joint statement issued March 1.
We need to know whether hedge funds are risky business or real asset builders for retirement, Mr. Baucus said in the statement. Mr. Grassley added: We dont know enough about hedge funds to know whether they make a pension plan more secure or more unsound.
New ethical strategy
F&C Management introduced a sustainable international equity strategy that screens on environmental, social, ethical and other factors, said Jason Hollands, head of communications. The new strategy, set up as a commingled fund and benchmarked to the MSCI EAFE index, will be marketed to U.S. pension funds and other institutional investors, Mr. Hollands said in an interview. The strategy will exclude companies in armaments, tobacco and other industries, while including companies involved in constructive environmental efforts and alternative energy sources, among other areas, he said. Also, under the strategy, F&C will engage companies on corporate governance issues, he said.
120/20 at INTECH
INTECH introduced its first long/short equity strategy for institutional investors, confirmed James Aber, a spokesman for parent company Janus Capital Group. The Collared Long/Short (120/20) strategy aims to beat its benchmark, the Russell 1000 index, by an annualized average gross return of between 4.75% and 5.25% over the long term. It will be available as a separate account, with a minimum $50 million investment, and through a commingled fund, with a minimum $15 million investment.
130/30 at Lee Munder
Lee Munder Capital Group introduced an international 130/30 strategy, said CIO Jeff Davis. This marks the third strategy the quant group, led by Gordon Johnson, has launched since he joined Lee Munder from Evergreen Investments in August. While some consultants will be looking for multiyear track records, the teams six years of working together and the strong start for their first two strategies, combined with growing market interest in 130/30 strategies, will likely spark interest in the new offering, Mr. Davis said.
Returns up at North Dakota
North Dakota Teachers Fund for Retirement, Bismarck, had a 17.2% investment return for the year ended Dec. 31, and the Public Employees and Highway Patrolmens Retirement System, also in Bismarck, reported 15.3%, said Steve Cochrane, executive director. The $1.9 billion teachers fund had a 13.3% return for 2005, and the return for the $1.8 billion public employees fund was 12.7%.
Trustee studies program
National Conference on Public Employee Retirement Systems, Washington, together with the Labor & Worklife Program at Harvard Law School, will introduce their Program for Advanced Trustee Studies on July 26, said NCPERS spokesman Ryan Francis. The two-day program will address topics such as targeted investing, trustee ethics, pension finance, divestiture legislation and law. It will be held at the Harvard Law School in Cambridge, Mass. Attendees will be selected based on length of service as a trustee, continuing education and professional affiliations, Mr. Francis said.
We are really looking for interested, engaged participants, and we want the Program for Advanced Trustee Studies to be highly interactive, with attendees entering into dialogue and debate with their faculty and fellow participants, he said in an e-mail.
There are 50 spots available for public pension trustees who have at least five years of experience. Enrollment applications will be available in mid-March on NCPERS website at www.ncpers.org.
Teamsters, Central States, reports 14.45% investment return
ROSEMONT, Ill. Teamsters, Central States, Southeast and Southwest Areas Pension Fund reported a 14.45% preliminary return on investments for the year ended Dec. 31, according to a report filed with the U.S. District Court in Chicago, under a consent decree with the Department of Labor. The fund had $20.6 billion in assets as of Dec. 31. Goldman Sachs Asset Management, which oversees management of 40% of the fund as one of its two named fiduciaries, returned 16.44% for the year, underperforming the 17.68% return of the portfolios customized benchmark, the report said. Northern Trust Global Advisors, which oversees management of 40% of the fund as the other named fiduciary, returned 19.16%, compared with a customized benchmark return of 19.86%. The GSAM and NTGA funds invest in a mix of U.S. and international equities, fixed income and real estate. The other 20% of the fund, which is managed separately in fixed income by another investment manager, returned 4.35% for the year, according to the report, which did not identify the firm or give benchmark comparisons for the fixed-income fund. Frank J. McGarr, special counsel who filed the report, GSAM spokeswoman Andrea Raphael and NTGA spokesman John OConnell declined to comment. Mark Vieu, division manager, Teamsters, Central States fund, did not respond to phone calls by press time.
Pennsylvania State Employees returns 16.4% in 2006
HARRISBURG, Pa. Pennsylvania State Employees Retirement System had a 16.4% investment return in 2006, adding roughly $4.5 billion; the fund ended the year with $32 billion in assets. The returns were fueled, in particular, by the systems real estate portfolio, which returned 17.6%; domestic equities, 18.8%; private equity, 23.2%; and international equity, 26.8%. The funds overall investment returns placed it in the top quartile of public pension funds, according to the Wilshire Trust Universe Comparison Survey. The median return among public plans surveyed was 14.3% for 2006. The retirement systems asset allocation at the end of 2006 was 30.9% domestic equities, 20.5% international equities, 15.3% fixed income, 13.2% alternative investments, 7.9% real estate, 6.1% inflation-protected securities, 4.9% global equities and 1.2% cash.
Ohio Public Employees reports 14.9% investment return for year
COLUMBUS Ohio Public Employees Retirement System, Columbus, had an investment return of 14.9% for 2006, ending the year with $64.8 billion in assets, said spokesman Richard Baker. The funds 2006 target return was 8%. It benefited from strong domestic and international equity markets as well as the liquidity boom in alternative asset classes said Jennifer Horn, director of investments, in a news release. The system is currently 93% funded.
Median foundation/endowment earns 14.4% investment return
NEW YORK Foundation/endowment plans earned a median 14.4% for the year ended Dec. 31, while public plans returned a median 14.3% and corporate plans, 13.3%, according to Mercers Summary Performance of U.S. Institutional Portfolios survey. For the quarter, U.S. foundation/endowment earned a median 6.1%, while public pension plans earned a median 5.8% and the corporate plans, 5.7%. For the 10 years ended Dec. 31, all three plan types averaged returns between 8.8% and 9.8%, on an annualized basis. Mercer surveyed 229 corporate pension plans, 48 public pension plans and 124 foundations and endowments.
Cammack, LaRhette Manin merge
NEW YORK Charles W. Cammack Associates and LaRhette Manin Benefits Service Group merged to form Cammack LaRhette Consulting, said Peter Larkin, spokesman for the new company. He declined to discuss the terms of the merger. Cammack LaRhette provides actuarial and investment advisory consulting services to defined contribution and defined benefit plans. Cammack executives initiated the merger because they wanted to beef up their retirement consulting business, Mr. Larkin said. Emile J. Schoffelen, former president and chief executive officer of Charles W. Cammack Associates, will be CEO of the merged company, and Mark B. Manin, former president of LaRhette Manin, will be president of Cammack LaRhette. Mr. Larkin said all personnel will be retained.
More of Segals multiemployer plan clients fully funded
NEW YORK Of Segal Co.s 410 multiemployer pension plan clients, 14% were fully funded for plan years starting in 2005 up from 11% the previous year, according to a study the actuarial firm released Feb. 27. The study also projected the companys average multiemployer plan client would be 94% funded through the end of the 2006 plan year. The average withdrawal liability funded ratio a measure of an employers obligation when it leaves a plan was 81% for plan years starting in 2005, up from 80% the previous year. Segal also projected the average withdrawal liability funded ratio would rise to 88% for the surveyed plans by the end of their 2006 plan years.
Berkeley Capital to buy, rename CapitalWorks
SAN DIEGO Berkeley Capital Management, an equity investment management boutique with $4.3 billion in assets under management, will acquire the $650 million investment advisory business of CapitalWorks Investment Partners, said Kevin Cuccias, Berkeley chief executive officer. The five-man CapitalWorks investment team, led by Chief Investment Officer John Wylie and portfolio manager Kenneth Applegate, will become the Harlingwood Capital Management division of Berkeley Capital. Terms of the transaction werent disclosed. The Harlingwood Capital team brings Berkeley Capital expertise in microcap, small-cap and smidcap growth equities, as well as small-cap hedge and convertible arbitrage portfolios. Berkeley Capital will be looking to further expand its lineup of institutional investment strategies by bringing on additional teams, according to interviews with Mr. Cuccias and Frank P. Hurst, who joined Berkeley Capital as president and director of marketing, a new position. Mr. Hurst a co-founder of Duncan-Hurst Capital Management in 1990 who left that firm in 2005 said Berkeley will look at opportunities as they emerge, with small-cap areas such as value, international and emerging markets among possible targets, along with more alternatives. Berkeley Capital is majority owned by Lovell Minnick Partners.
Financial stocks to be favored in Russell rebalancing
NEW YORK This years Russell 2000 index rebalancing will include several methodology changes that would sharply reduce turnover and favor financial stocks, analyst Melissa Roberts said in a report from investment bank Keefe, Bruyette & Woods. We estimate the cutoff for inclusion in the Russell 2000 index is now about $256 million, with the top stock in the index at $2.3 billion, she said. We expect to see the largest number of financial additions to the Russell 2000 index from the insurance industry and the largest number of financial deletions from the commercial banks industry group, Ms. Roberts said. The report identified 36 financial companies expected to enter the Russell 2000 index and 25 others in the same sector expected to be removed from the index. Ms. Roberts would not disclose the companies. New additions to the Russell 2000 index have historically outperformed in the months prior to reconstitution, Ms. Roberts noted. Russell Investment Group rebalances its equity indexes every year using stock prices as of May 31, while the reconstitution takes place in late June.
S&P to provide real-time daily calculation of 6 WisdomTree indexes
NEW YORK WisdomTree Investments selected Standard & Poors to provide real-time daily calculation of the six WisdomTree indexes that use S&P core earnings to weight the constituents, confirmed Jessica Caris, spokeswoman for WisdomTree. WisdomTree is leveraging Standard & Poors ability to calculate custom indices across all types of calculation methodologies, according to an S&P statement. S&P core earnings include expenses, incomes and activities that reflect the actual profitability of an enterprises ongoing operations, the statement said.
Mutual funds see inflows of $42.3 billion in January
NEW YORK Net mutual fund inflows, excluding ETFs, were $42.3 billion in January, according to Lippers latest Fundflows Insight report. Stock and mixed equity fund flows came to $38.7 billion for the month, while bond funds pulled in $15.4 billion. Money market funds, however, saw a net outflow of $11.8 billion. World equity funds, including both global funds and international funds, added $18.4 billion. U.S. equity funds attracted $8 billion, the first net inflow in eight months. Lifecycle funds attracted $10.6 billion.
S&P offers global thematic indexes
NEW YORK Standard & Poors introduced three global thematic indexes composed of the largest publicly listed companies that meet specific size and liquidity criteria, according to a news release. The S&P Global Infrastructure index, with a market cap of $974 billion, consists of 75 companies in transportation, utilities and energy in 22 countries; the Global Water index, with a market cap of $228 billion, comprises 50 companies in water utilities, infrastructure, equipment and materials in 14 countries; and the Global Clean Energy index, with a market cap of $117 billion, tracks 30 companies in clean energy production, technology and equipment in 10 countries. S&P is considering more thematic indexes, although no timeframe has been set, the statement said.
ProFunds introduces 12 ETFs benchmarked to Russell style indexes
BETHESDA, Md. ProFunds Group introduced 12 ProShares ETFs benchmarked to six Russell style indexes, providing short or magnified exposure to large-cap, midcap and small-cap versions of growth and value indexes, according to a news release. The indexes began trading today on the American Stock Exchange. The ProShares Ultra style is designed to double the daily performance of the applicable index, while the ProShares UltraShort style is designed to provide twice the inverse of the daily performance of the applicable index, the statement said. JPMorgan provides fund administration to all the ProShare ETFs. ProShares has $3 billion in assets under management.
WisdomTree adds earnings-weighted ETFs
NEW YORK WisdomTree Investments launched six earnings-weighted ETFs on the American Stock Exchange, according to a news release. They are the Total Earnings Fund, Earnings 500 Fund, MidCap Earnings Fund, SmallCap Earnings Fund, Earnings Top 100 Fund and Low P/E Fund. Those seeking broad market exposure or exposure to traditional sector classifications through companies with an earnings track record may want to consider the earnings family, said Bruce Lavine, WisdomTree president and COO, in the release.
Analyst raises NYSE Group earnings estimates for this, next year
NEW YORK NYSE Group earnings estimates for 2007 and 2008 are being raised ahead of the merger with Euronext, expected to close in early April, according to a note to clients from analyst Niamh Alexander at CIBC World Markets. For 2007, Ms. Alexander is raising her earnings forecast to $2.76 from $2.41, and for 2008 to $3.56 from $2.81. The new forecast assumes that the NYSE Euronext group achieves approximately 25% of the targeted $275 million in cost synergies in 2007 and 75% by 2008, with full realization by 2009 as targeted, according to the note. The earnings projection could be revised still higher if NYSE retains a greater share of its NYSE-listed trading volume than we currently estimate or if the futures derivative business, Euronext Liffe, is more successful in rolling out new products to the U.S. than we currently estimate. The lockup period when NYSE shareholders are not allowed to sell shares ends March 7 for 16% of the outstanding shares, Ms. Alexander noted. Ms. Alexander saw the possibility that after the Euronext merger, the NYSE could ease some transfer restrictions.
CBOT requests comment on proposed CBOE exercise rights rule
CHICAGO The Chicago Board of Trade is asking its members to comment on the Chicago Board Options Exchanges proposed rule change to terminate members exercise rights when the merger between the CBOT and the Chicago Mercantile Exchange closes. In a letter to CBOT members filed today with the SEC, CBOT Holdings Chairman Charles Carey and CBOT President and CEO Bernard Dan said the CBOEs proposed rule change, if it is approved by the SEC, would extinguish the exercise right granted to CBOT members in the CBOEs certificate of incorporation. CBOT members helped create and funded the CBOE in 1973. In a filing that the SEC published for comments on Feb. 6, the CBOE proposed that all CBOT exercise rights be terminated when the CME-CBOT merger closes. We believe the SEC should disapprove the CBOEs proposed rule change, and we intend to submit written comments covering some or all of the following points. Please be sure the SEC receives your comments on for before the Feb. 27 deadline, the CBOT executives wrote, adding that the CBOT and its members contributed their time, their money and their intellectual property. But for the contributions of CBOT full members, there would be no CBOE. T. Rowe Price makes mutual fund debut in India MUMBAI, India Kotak Asset Management will launch a mutual fund to invest in T. Rowe Price Funds SICAV-Global Emerging Markets Equity Fund. The agreement between the two firms marks T. Rowe Prices debut in the Indian fund market.