NEWS BRIEFS:Bank closes DB plan

Bryn Mawr Bank will close its defined benefit plan to future employees and end benefit accruals for current employees on March 31, said Bob Ricciardi, executive vice president. The company will make a 3% base salary contribution to its 401(k) plan, in addition to the 3% company match. Mr. Ricciardi would not say how much the move will save the company. The defined benefit plan had $25.9 million in assets and the 401(k) plan had $16.8 million as of December 2004, according to the 2007 Money Market Directories.

Fidelity Investments reported $851.4 billion in record-keeping assets in its defined contribution services in 2007, up 8% from the previous year, according to a news release. Assets under administration for Fidelity’s retirement services business, which also includes non-record-keeping assets with its DC and DB businesses, rose 8% to $918.4 billion for the year.

Overall, Fidelity added nearly 524,000 DC participants for the year, bringing the company’s total to 13.6 million as of Dec. 31.

In addition, Fidelity reported record new inflows of $41 billion for its record-keeping assets in January, representing 360,000 new participants

The $510 million Austin (Texas) Police Retirement System committed $15 million to the CapitalSpring Franchise Equity Capital Partners II fund, which invests in “small-unit-count franchises;” $10 million to the Clinton Magnolia hedge fund; and $7.5 million to Timbervest Crossover Partners II, a private equity fund that specializes in wetland and wildlife land credits. The system also invested $5 million in an opportunistic limited real estate partnership with Vision Capital Partners.

Forty-nine U.S. and European institutional investors responsible for more than $1.75 trillion in assets announced a goal of investing $10 billion collectively over the next two years to support clean technology and targeted a 20% reduction of energy use in their core real estate holdings in the next three years.

In announcing the investor group’s climate change action plan Feb. 14 at the Investor Summit on Climate Risk at the United Nations in New York, they also pledged to require their investment managers and consultants to report how they assess climate risk in their portfolios, and ask the SEC to issue guidance on disclosure of climate risks and opportunities from individual companies.

California Controller John Chiang said he has asked the boards of the $244.8 billion California Public Employees’ Retirement System and $173.7 billion California State Teachers’ Retirement System, both in Sacramento, to survey their external equity managers and develop a set of best practices to use when the managers evaluate underlying companies’ risks and opportunities associated with climate change. That set of best practices will be used when CalPERS and CalSTRS review managers or make requests to hire new managers.

Mercer opened an investment consulting business in India, researching asset management firms based in the country. Rashmi Mehrotra was named principal and business leader for consulting in India, according to a Mercer news release. Separately, Mercer’s revenue was $882 million as of Dec. 31, up 14% from three months earlier and 11% higher than a year ago, according to an earnings release from parent Marsh & McLennan Cos. Inc. Revenues for Mercer’s retirement and investment consulting businesses were $340 million for the quarter, up 16% from the third quarter, and its investment outsourcing business had revenues of $197 million, up 17% from Sept. 30.

Peter G. Peterson, senior chairman of Blackstone Group and a former U.S. commerce secretary, is launching a public policy foundation that is committed to provide funding of at least $1 billion over the next several years, the foundation said in a statement Feb. 15.

U.S. Comptroller General David Walker, who announced he’ll step down from that post March 12, was named president and CEO of the foundation, whose first two grant recipients will be the Concord Coalition for the Fiscal Wake-up Tour, an organization dedicated to developing awareness about the need for fiscal responsibility and the danger of budget deficits, and Sam Nunn’s Nuclear Threat Initiative, an organization working to reduce nuclear proliferation and threats from biological and chemical weapons.

The foundation also will target issues, including unsustainable entitlement benefits, excessive trade deficits, rising health-care costs, energy consumption and global warming.

Modern portfolio theory needs to be used when creating equity glide paths for target-date funds, according to a report from Ibbotson Associates. Additionally, real return asset classes such as commodities and real estate should play an increasing role in the construction of glide paths, according to the paper, “Lifetime Asset Allocations: Methodologies for Target Maturity Funds.”

During the accumulation phase, expense, savings, mortality and market are the primary risks for participants. During the retirement phase, the primary risks are expense, longevity and market. According to Ibbotson’s report, an investor’s glide path should be customized based on these dimensions.

Securities and Exchange Commission-registered investment companies would be required to disclose when they divest in companies doing business in Sudan under the provisions of the Sudan Accountability and Divestment Act, according to a proposed SEC regulation.

The act, signed by President Bush on Dec. 31, allowed pension plans and mutual funds to divest holdings in key companies doing business in Sudan without facing fiduciary lawsuits. The law authorizes divestment from companies involved in Sudan’s military, power production, petroleum and mining-related industries, leaving it up to a fund to determine that the company is involved in one of the targeted enterprises. The law also required the SEC to establish regulations on the divestment disclosures by April 29.

The public will have 30 days to comment on the proposed disclosure regulations after publication in the Federal Register, the SEC news release said.

U.S.-listed ETFs had $570 billion in assets as of Jan. 31, down $37.5 billion or 6.2% from the previous month. A report by SSgA blamed the decline on weak domestic and international equity markets. There were 634 ETFs in January, including five new funds. BGI remained the largest ETF provider, with 53.8% of total market share. SSgA was second with 25.7% and Vanguard was third with 7.3%.

Pension plans, non-profits, foundations and endowments in the Wilshire Trust Universe Comparison Service generally posted negative returns for the fourth quarter but better returns for all of 2007. The median investor plan’s investments lost 0.58% in the fourth quarter but returned 7.6% for the year, according to Wilshire.

The median corporate plan returned -0.73% for the quarter and 7.66% for the year; public pension funds, -0.71% for the quarter and 7.43%; foundations and endowments, -0.56% and 9.03%; Taft-Hartley funds, -0.46% and 6.99%; and non-profits, -0.51% and 8.19%.

“The negative returns for the quarter are not surprising given the performance of the U.S. equity markets,” said Hilarie Green, managing director and head of Wilshire Analytics' performance reporting division, in a release. In the fourth quarter, the S&P 500 index was down 3.33% but up 5.5% for the year.

Foundations and endowments and non-profits with assets greater than $1 billion were the only segments that had positive returns for the quarter with 0.13% and 0.14%, respectively.

These plans had higher than average allocation to real estate and alternative investments, which helped returns, Ms. Green said in an interview. The median foundation and endowment with assets greater than $1 billion invested 4.31% of its portfolio in real estate and 20.65% in alternatives; non-profits of the same size invested 2.24% in real estate and 22.46% in alternatives.

The CFTC is creating an advisory committee to discuss trading in energy markets and its supervisory role over those markets. The committee will be led by Walter Lukken, acting chairman of the Commodity Futures Trading Commission, and will include representatives from a cross-section of the industry with knowledge of the energy markets, including exchanges, producers, market users and consumers.

The CFTC in October told Congress of the need for a committee focused on energy markets following the 2006 $6 billion trading debacle of Amaranth Advisors LLC, which was partly attributed to the lack of close oversight of the over-the-counter energy market.

Marsh & McLennan Cos. Inc.’s board of directors proposed eliminating staggered terms and subjecting all directors to annual election, according to a company statement issued Feb.14. The proposal, which the company will include in its 2008 proxy statement to amend the corporate charter, is subject to shareholder vote of approval at its annual meeting, scheduled for May. “The decision to declassify is the latest step in the board’s ongoing effort to implement best corporate governance practices at MMC,” Stephen R. Hardis, chairman of MMC’s board, said in the statement.

Institutional investors are avoiding risk more now than they have in the past seven years, according to the most recent Merrill Lynch survey of fund managers. Some 30% of the managers surveyed Feb. 1-7 said they’ve hedged against falls in the equity markets over the next three months. Meanwhile, cash assets, often seen as a safe haven in turbulent markets, are at an average of 4.7% among respondents. About 41% of managers are overweight in cash, the highest level since the Sept. 11 terrorist attacks, the survey noted.

“Risk aversion is so extreme and cash levels are so high, that the challenge is now to identify the catalyst that prompts money to return to the stock market,” said David Bowers, independent consultant to Merrill Lynch. “While it’s not clear what that catalyst will be, there’s no doubt that the ability to draw a line under the credit crunch will be an important step.”

Fund managers’ outlook for corporate profits looks bleak, with 68% expecting deterioration in profits over the next 12 months, up from 57% in January; 16% saying the global economy was in a recession, double the number from last month; and 28% thinking a recession is likely in the next 12 months, up from 19% in January.

The February survey was completed by 190 managers with a combined $587 billion in assets under management.

Growth stocks and emerging markets helped active international equity managers earn 12% in 2007, compared to the MSCI EAFE index return of 11.2%, according to a report by InterSec Research on its EAFE Plus universe. The median portfolio in the growth universe returned 18.1% vs. 10.1% for the median value portfolio. The median emerging markets equities manager returned 40.4%. “Excellent stock selection in … Russia and China were the largest contributors to value added for the median,” according to the report. The universes consist of 135 international and 60 emerging markets portfolios, with respective total assets of about $1 trillion and $150 billion.

Morningstar on Feb. 14 unveiled a new rating system for hedge funds, similar to the one- to five-star rating system used by the firm to rank mutual funds. Morningstar analysts will use quantitative and qualitative processes to analyze hedge funds’ risk-adjusted performance. Only single and multistrategy hedge funds with a minimum track record of 28 months will be ranked. Of the 4,400 hedge funds in Morningstar’s database, about 1,800 will receive ratings.

Also debuting is the Morningstar 1000 Hedge Fund index as well as 17 hedge fund strategy-specific indexes. According to a news release, each index is composed of 90% of the single and multistrategy hedge funds within Morningstar’s database. The MHFI 1000 index is valued daily.

“We want to make researching hedge funds a more transparent process and our new rating and indexes will allow … investors … to better evaluate and compare hedge funds to their peers,” John Rekenthaler, vice president of research, said in a news release.

Corrected on Feb. 28

CME Group, which will stop trading futures contracts on the Russell 2000 small-cap index in September, is waiving all trading and clearing fees for derivatives contracts on the S&P 400 midcap index. The exchange already waived trading and clearing fees for futures and options on futures contracts this year on the S&P 600 Small-Cap index.

“The S&P SmallCap 600 and MidCap 400 contracts, along with other products in the equity index complex, are attractive alternatives to the Russell 2000 contract, which will no longer be listed on CME Globex following the September 2008 contract expiration,” the CME said in a news release.

NEW YORK — The median plan in the BNY Mellon U.S. Master Trust Universe returned -0.55% in the fourth quarter, the first quarterly loss since the second quarter of 2006. However, the median plan for the 583 corporate, foundation, endowment, public, Taft-Hartley and health-care funds in the universe returned 8.28% for 2007, the fifth consecutive year of positive returns.

A relatively low allocation to U.S. equities and a high allocation to alternatives helped endowments lead the pack during the fourth quarter, said Greg Stewart, first vice president with BNY Mellon Asset Servicing.

The median plans of the 94 endowments and 23 health-care funds in the universe returned 0.06% and 0.01%, respectively. The median plans of the 257 corporate and 65 public funds in the universe lost 0.78% and 0.68%, respectively. The median plan of 86 foundations lost 0.42%, while the median plan of 35 Taft-Hartley plans lost 0.54%.

Domestic fixed income posted the strongest return, up 2.65%, while U.S. equities dropped 3.3% and non-U.S. equities slipped 0.8%.

The average plan size in the Master Trust Universe is $3 billion, and the average asset allocation was: 35% domestic equity, 25% domestic fixed income, 19% international equity, 8% alternative investments, 3% real estate, 1% each international fixed income and cash, and 8% other investments.

WASHINGTON — The Securities and Exchange Commisson is concerned that sovereign wealth funds could undermine the integrity of U.S. financial markets through insider trading or other market abuses, Linda Chatman Thomsen, director of the SEC’s enforcement division, said Feb. 7 at a hearing by the U.S.-China Economic and Security Review Commission.

Sovereign wealth funds are similar to hedge funds in that their operations are relatively opaque to regulators — and both often have sufficient asset size to give them power in U.S. financial markets, Ms. Thomsen testified. But unlike hedge funds, sovereign wealth funds are controlled by governments, and that connection could give them access to information that is not available to other investors, Ms. Thomsen said.

“There is the potential for these powerful market participants to obtain material, non-public information, either by virtue of their financial and governmental powers or by use of those powers, to engage in illegal insider trading using that information,” Ms. Thomsen said. “The magnitude of any such conduct could be quite large given the assets these funds have at their disposal.”

She said China Investment Corp., which has estimated assets of $200 billion and is run by the Chinese government, “appears to be taking a measured approach to its investments and is acting as a passive investor.”

The commission, created by Congress, is charged with monitoring the national security implications of trade and economic relationships with China.

TORONTO — CPP Investment Board, Toronto, which manages the assets of the Canada Pension Plan, had a “marginally negative” investment return of 0.14% for the fourth quarter, a spokesman for the C$119.4 billion (US$119.6 billion) plan confirmed. The investment loss, combined with benefits payments, dropped total assets by 1.6% from C$121.3 billion as of Sept. 30. Investments returned 10.1% for the four years ended Dec. 31.

The quarterly results “reflected the markets’ volatility, and in the early part of 2008, we are seeing volatility intensify,” David Denison, president and CEO of the CPP Investment Board, said in a news release. The fund’s asset allocation is 54% public equities; 25.6% fixed income; 9.5% private equity; 5.4% real estate; 3.3% inflation-linked bonds; and 2.2% infrastructure.

WASHINGTON — Mutual fund assets worldwide jumped 6.2% to $25.82 billion in the third quarter of 2007, the Investment Company Institute reported. However, net cash inflows for the period came to $319 billion, the first time in four quarters the total fell below $400 billion. The ICI said the inclusion in its data of China’s mutual fund assets for the first time, together with the dollar’s decline in currency markets, helped swell the quarterly growth figure. For example, ICI noted that while Europe’s mutual fund assets rose 2.9% for the quarter on a dollar-denominated basis, they declined 1.9% on a euro-denominated basis. With the subprime mortgage crisis sparking a sharp pickup in capital market volatility, money market funds proved the biggest magnet, with net inflows surging to $282 billion from $138 billion in the prior quarter. Bond funds suffered net outflows of $51 billion, off from net inflows of $98 billion in the prior quarter. Equity funds, meanwhile, pulled in net inflows of $32 billion, down from $103 billion for the prior quarter. The Asia/Pacific region accounted for $48 billion of equity inflows for the quarter, while the Americas pulled in $14 billion and Europe saw a net outflow of $31 billion.

MELBOURNE, Australia — A potential separation between alpha managers and others could grow over the next decade, says Harry Liem, a senior associate at Mercer.

Mr. Liem, author of the new book “2020 Vision: Investment Wisdom for Tomorrow,” said a tougher monetary environment, global economic imbalances, increased competition and heightened interest in alternatives all point to the split among money managers. “Only those players able to adapt themselves faster than their competitors will maintain their leading edge,” Mr. Liem said in a news release concerning the book.

Also in the book, emerging markets is seen as the possible future growth engine of the world at a time of economic slowdown in the U.S. “The pendulum of history which swung so visibly and decisively towards the West in the past 200 years is now beginning to return at an accelerating pace towards a 21st-century world dominated by the East, in wealth, population, technology and economic dynamism,” Robert Lloyd George, chairman of Lloyd George Management, is quoted in the book.

“2020 Vision” is based on 12 interviews from leading professional and academic figures, including Stan Beckers, managing director and head of alpha management at BGI; Ray Dalio, chairman and CEO at Bridgewater; and Ben Inker, CIO at GMO.

TACOMA, Wash. — About half of the 100 top performing global stocks last month were in materials and processing, and the financial sectors, said Stephen Wood, senior portfolio strategist at Russell Investments. The sectors were buoyed by the effects of the subprime turmoil and the threat of a U.S. recession. In financials, “what you’re beginning to see is capital coming in to those extremely distressed assets,” he said. Returns in the materials sector were boosted by a too-pessimistic view of the U.S. economy that artificially pushed prices down. “We priced in almost a certainty of a recession,” Mr. Wood said.

Forty-five of the top 100 stocks are U.S. stocks; 13, Japanese; nine, Taiwanese; eight are from the U.K.; and five are from Kuwait.

IMPAC Mortgage Holdings Inc. was the best performing stock in January, returning 156.36% for the month. Second was Idenix Pharmaceuticals Inc., up 92.2%, and third was Egdon Resources PLC, up 67.99%.

WASHINGTON — The National Institute of Pension Administrators and the American Society of Pension Professionals and Actuaries jointly created the American Institute for Retirement Education, a for-profit training firm. NIPA and ASPPA created the company in expectation of it bidding on an anticipated RFP by the Internal Revenue Service to outsource administration, curriculum development and examination for a new professional designation called enrolled retirement plan agent, according to a statement from NIPA.

The IRS is creating ERPA for professionals in the retirement field who have been unable to practice before the tax agency on qualified pension plan matters. The IRS hasn’t set a timetable for finalizing the ERPA designation or issuing the RFP, said Jennifer Kasowicz, NIPA spokesman. NIPA and ASPPA officials believe the RFP could be issued some time this year, she added.

Dean Patterson, IRS spokesman, could not provide further details by publication time.