The PBGC reached a settlement with Electrolux Home Products regarding the Electrolux Pension Plan for Bargaining Employees at a now-shuttered plant in Greenville, Mich. Under the agreement, Electrolux will waive an existing $42.5 million credit balance in its pension fund and will contribute a total of $35 million over the next five years to the pension plan, according to a PBGC news release. The size of the Electrolux plan could not be learned, but the plan was 81% funded with unfunded liabilities totaling $77.5 million in March 2006 when the plant closed, according to the release.
Evergreen splits up U.S. bond operations
Evergreen Investments created two new fixed-income units under its Tattersall Advisory Group as part of a larger realignment of its bond operations, said Laura Fay, spokeswoman.
Tattersall Liquidity and Structured Solutions, previously Evergreens short-term unit, will handle about $70 billion in short-term strategies, while Tattersall Multi-Strategy Fixed Income Solutions, previously part of TAG, will run roughly $25 billion in long-term strategies.
Lisa Brown-Premo was named CIO of the short-term unit. She was a portfolio manager with the multistrategy unit and will continue to oversee $20 billion in long-term bonds. The long-term unit, under CIO Bob Calhoun, is based in Richmond, Va., while Ms. Brown-Premos unit is in Charlotte, N.C.
The realignment affects only Evergreens U.S. fixed-income operations.
Wall St. firms report higher assets
Three Wall Street firms reported higher assets under management for their fiscal years ending Nov. 30:
• Goldman Sachs reported $868 billion in assets under management as of Nov. 30, the end of the companys fiscal fourth quarter. Goldmans assets increased by 9% during the quarter, and 28% for the year, with most of the increases occurring in Goldmans money markets business. Money market assets grew to $206 billion, up 26% for the quarter and 75% for the year. Fixed-income assets rose to $256 billion at the end of the quarter, up 11% for the quarter and 29% for the year. Equity assets increased to $255 billion, up 2% for the quarter and 19% for the year. Alternative assets remained flat at $151 billion during the fourth quarter; David Viniar, Goldmans CFO, said in a conference call that the firm experienced around $3 billion in redemptions across its quantitative hedge funds during the quarter. Overall, the asset management business generated $1.17 billion in revenues during the quarter, down 3% from the previous quarter but up 25% from for the year ended Nov. 30. The decrease during the recent quarter was the result of lower incentive fees, which were down 33% to $31 million.
• Lehman Brothers reported $282 billion in assets under management for its fiscal fourth quarter ended Nov. 30, according to a company filing. Assets under management were up 2.5% for the quarter and 25.3% for the year, driven by inflows and market appreciation in equities, fixed income and alternatives. During the quarter, Lehmans alternative assets increased by 13.3% to $34 billion, fixed-income assets rose 4.1% to $75 billion and equity assets were up 2.9% to $107 billion. Money market assets declined 4.3% for the quarter to $66 billion, but were still up 37.5% for the year. Overall, the increase in assets resulted in record asset management revenue for a single quarter at Lehman. The company reported $533 million in revenue for asset management during the quarter, a 13.8% increase from the previous quarter and a 45% increase from last year.
• Morgan Stanley reported $597 billion in assets under management at the end of the quarter, up 3.5% from the previous quarter and up 20% from the fourth quarter of 2006. The largest gains occurred in the companys non-U.S. business, where assets increased by 42% during the quarter and 12% for the year, to $132 billion. U.S. institutional assets stood at $128 billion as of Nov. 30, up 28% for the quarter and 5% for the year. Overall, net revenues for the asset management businesses came to $1.3 billion, down 7% for the quarter but up 29% for the year. The drop for the quarter was connected to a loss of roughly $129 million related to securities issued by structured investment vehicles. The annual increase in revenues was driven by increased assets under management, but also from higher performance fees in its alternative investment business, which includes hedge fund FrontPoint Partners.
Batterymarch offers large-cap value
Batterymarch Financial Management introduced a U.S. large-cap value equity strategy it has been incubating for three years, said CIO Tom Linkas. The strategy, which considers 80 factors, is designed to outperform its Dow Jones Wilshire U.S. Large Cap Value benchmark in both up and down markets, said Charles Ko, senior portfolio manager and director of U.S. equities. Year-to-date, the strategy, with $21 million in client money, is beating that benchmark by 2.8 percentage points, with eVestment Alliance reporting compounded outperformance of 2.21 points a year for the three years through Sept. 30. Mr. Linkas said Batterymarch is also looking to introduce a global 130/30 strategy in the first quarter.
St. Louis Schools adds to fund
The $1.1 billion St. Louis Public School Retirement System will add about $19.2 million to a Mellon domestic core fixed-income index fund benchmarked to the Lehman Aggregate index, according to recently released minutes from a Nov. 6 special meeting. The system had $14.7 million in the Mellon fund as of Dec. 31. Funding will come from terminating a $19.2 million domestic core bond portfolio managed by MDL Capital Management. The termination was recommended by investment consultant NEPC owing to recent findings in a legal action brought against the firms owner and chief executive officer, Mark Lay, according to the minutes. Neither Mr. Lay nor Andrew Clark, executive director, returned phone calls seeking comment.
Hedge fund debuts decline
Hedge fund launches were down as of Sept. 30, according to data from Hedge Fund Research. For the year as of Sept. 30, 863 new hedge funds were launched, compared with 1,518 in all of 2006 and 2,073 in 2005. Over the same time period, 408 hedge funds had been liquidated, compared with 717 in calendar year 2006 and 848 in 2005. At the present pace, HFR researchers projected that the combined rate of launches and liquidations in all of 2007 would decline about 25%, the second consecutive year with a decrease.
One possible issue is the ongoing consolidation of capital in larger funds. In the third quarter of this year, investors allocated nearly 90% of new capital to funds with greater than $1 billion already under management, HFR President Kenneth J. Heinz said in a news release. Investor requirements for size and infrastructure may be making it more challenging to open a new fund.
3 new Vanguard mutual funds
Vanguard introduced three mutual funds, the Vanguard Mega Cap 300 Index, Vanguard Mega Cap 300 Growth Index and Vanguard Mega Cap 300 Value Index funds, according to a news release. Institutional shares will have an expense ratio of 0.08% for investments of $5 million or more.
Separately, the Vanguard Extended Duration Treasury ETF began trading Dec. 10 on the American Stock Exchange, confirmed Rebecca Cohen, Vanguard spokeswoman. The ETF is being marketed to pension funds using a liability-driven investment strategy. The fund will match the performance of the Lehman Brothers Treasury STRIPS 20-30 year Equal Par Bond index and will have a duration of 22 to 27 years.
Principal acquires actuary
Principal Financial Group signed an agreement to acquire Retirement Consulting Actuaries, said Susan Houser, spokeswoman for Principal. Barry Young, principal actuary and founder of RCA which provides actuarial, administrative and consulting services to defined benefit plans will continue to lead the team. The transaction is expected to close Jan. 1; terms were not disclosed.
Goldman index tracks mortality, longevity risk
The Goldman Sachs Group introduced an index that will allow market participants to manage and trade their exposure to longevity or mortality risk, according to a news release. The index, QxX.LS, is the first in an expected series of indexes on longevity and mortality risk and represents a pool of 46,290 insured U.S. residents over the age of 65.
The index could benefit pension funds, which are exposed to longevity risk, as well as holders of mortality risk such as insurance carriers.
Columbia to close enhanced cash fund
Columbia Management, Bank of Americas money management arm, will wind down a huge privately placed enhanced institutional cash fund to mitigate the negative impact on clients of continued weak market conditions. The fund, which sought to give institutional investors better returns than a money market strategy, has stopped taking new investments.
A handful of clients, accounting for about $21 billion invested in the strategy, agreed to move their holdings into separately managed accounts, for which Columbia will charge no fee for a period of time, Columbia spokesman Jon Goldstein said. Columbia executives expect most other investors, with combined assets of $12 billion, to stay in the fund as the securities it holds mature over the coming 24 months, said Mr. Goldstein.
Absolute-return firm opens
A team of investment veterans that left Arnhold & S. Bleichroeder Advisers in September launched investment management firm International Value Advisers. The new firm offers absolute-return global and international strategies to institutional and high-net-worth investors, CIO Charles de Lardemelle said in an interview.
In addition to Mr. de Lardemelle, formerly an associate portfolio manager and director of research with Arnhold, IVAs other founding partners are Simon Fenwick, a senior analyst at Arnhold and co-portfolio manager of Arnholds First Eagle Gold Fund; Michael Malafronte, a senior analyst at Arnhold and member of its global value team; and Lawrence Borsanyi, who served as the head of Arnholds product development and institutional client relations teams. Mr. de Lardemelle said the team focuses on downside risks and moving into asset classes such as high-yield bonds, commodities and precious metals when equities trading at sufficient discounts to their value cant be found.
Phoenix earns 1.3% in quarter
The $1.96 billion City of Phoenix Employees Retirement System earned 1.3% on investments for the quarter ended Sept. 30, said Greg Fitchet, investment manager. Quarterly returns lagged the custom benchmark by 51 basis points, while the year-to-date returns were 104 bps ahead of the benchmark. For the year ended Sept. 30, returns were 14.25%, 42 bps better than the benchmark.
Barclays sees global economic slowdown
Global economic growth is expected to slow, so investors should skew their portfolios more heavily to bonds, according to analysts at Barclays Capital. Equities arent expected to rally in the months ahead, and volatility should continue for both equities and debt. Commodities remain a good bet, according to the analysis, and the dollar is expected to remain weak, although the British pound also is likely to weaken.
It is critical to distinguish between two separate causes of the recent repricing of credit the lack of liquidity and forced selling, and changes in judgments about fundamental credit quality, noted Larry Kantor, co-head of research. He expects these two factors to decouple in the coming months.
2 leave Roxbury to form large-cap growth firm
Silas Myers and Brian Massey, former portfolio managers at Roxbury Capital Management, launched Mar Vista Investment Partners with seed money from Roxbury, said Kirk Kazanjian, a Roxbury spokesman. Mar Vista is a large-cap growth manager targeting institutional clients. Mr. Myers is CEO and Mr. Massey is president.
Mar Vista will subadvise Roxburys $73 million large-cap growth strategic portfolio and $2 million large-cap growth focus strategy, both of which run mainly institutional money. Assets from new investors in those strategies will be run under the Mar Vista name. Mar Vista also will subadvise Roxburys $22 million large-cap core portfolio and a $2 million health sciences portfolio, which have mainly retail assets. Roxbury also is providing Mar Vista with back-office and marketing functions.
IRA assets at all-time high, EBRI says
IRA assets jumped 16.5% in 2006 to a record $4.23 trillion, according to a study released Dec. 11 by the Employee Benefit Research Institute. The increase was fueled largely by rollovers from employment-based plans.
About 47% of individual retirement account assets were held in mutual funds in 2006, up from 46% in 2005 and 14% in 1981, EBRI said. Brokerage accounts held 38% of IRA assets in 2006 and 2005, up from 22% in 1981. The market share for banks and thrifts dropped to 7% in 2006 from 8% in 2005 and 58% in 1981.
North Dakota fund returns 2.06% in October
The $2 billion North Dakota Public Employees Retirement System returned 2.06% on its investments in October, outperforming its custom benchmark by one basis point, according to the plans website.
Winners included international equity, 3.92% for the month vs. 3.25% for the MSCI EAFE-50% Hedged index; international bonds, 2.25%, compared with 1.83% for the Citigroup Non-U.S. Government Bond index; and high-yield bonds, 1.05% vs. 0.67% for the Lehman Brothers High Yield 2% Issuer Constrained index.
Losers included real estate, 0.35% vs. 1.17% for the NCREIF Total index; domestic large-cap equity, 1.19%, compared with 1.59% for the S&P 500; and domestic small-cap equity, 2.51% vs. 2.87% for the Russell 2000.
Emerging markets equity had the highest return at 10.98%, but still underperformed the MSCI Emerging Markets index by 18 basis points.
Credit crisis stalls liability hedging
U.K. pension funds have been delaying their liability hedging strategies for up to a month because of the credit crisis, according to Watson Wyatt Worldwide.
International Swaps and Derivatives Association agreements and documentation are generally taking much longer to negotiate, Russell Masding, Watson Wyatt senior investment consultant, said in a telephone interview. Following the rattled credit market over the summer, banks generally pulled back from lending. The trend appears to have affected the market for inflation swaps, interest-rate swaps and options on swaps. Such instruments are widely used by pension funds to better match their assets with future liabilities in liability-driven investment strategies.
But Mr. Masding doesnt believe that temporary difficulties will stop pension funds from implementing LDI.
Blue Sky offers 1st strategy
Blue Sky Asset Management, established earlier this month, introduced its first strategy, a structured investment in U.K. banking shares, confirmed external spokesman Kevan Reilly. The Protected Income Plan, which is open to retail and institutional investors, aims to provide a fixed annual income of 10% per year with 100% contingent capital protection at maturity over a six-year term. The portfolio is concentrated on five U.K. financial institutions HSBC Holdings, Royal Bank of Scotland Group, Barclays Group, HBOS and Lloyds. The stocks were picked for their ability to maximize income with optimal capital protection factors.
Eurex closes ISE merger
Eurex, the German-Swiss derivatives exchange, closed its acquisition of the options-trading International Securities Exchange , ISE spokeswoman Molly McGregor said. Eurexs acquisition is the first of a U.S. exchange by a foreign group. ISE will continue to operate as a U.S. market regulated by the SEC, which approved the deal. Together, Eurex and ISE will be the market leader in individual equity and equity index derivatives worldwide, executives of the two exchange groups said in a statement. They intend to develop new listings, the first of which will be announced in early 2008.
No changes for top women in Fortune 500
Women held the top-paying position at 6.7% of corporations in 2007, the same as in the previous year, according a study by Catalyst of the Fortune 500. Women held 15.4% of corporate officer positions in 2007, down slightly from 15.6% the previous year. In 2007, 74 of the companies had no women corporate officers, up from 64 companies the previous year. Women held 14.8% of all board seats in 2007, up slightly from 14.6% the previous year. There was virtually no change in the numbers of companies with zero, one, two and three or more women on their boards, a statement about the study said.
Smart companies realize there is a strong business case for diversity, Ilene H. Lang, president of Catalyst, said in the statement. As prior Catalyst research shows, there is a substantial correlation between corporate financial performance and women's representation in leadership positions."