Teamsters Central States, Southeast & Southwest Areas Pension Fund, Rosemont, Ill., hired Mellon Capital Management Corp. to manage $5.4 billion in an S&P 500 index fund.
The money is part of a $6.1 billion payment made by United Parcel Service Inc. to withdraw from the Teamsters fund, according to a filing with the U.S. District Court in Chicago. The UPS payment, made in December as part of an agreement to withdraw from the Teamsters fund, raised the Central States assets to $26.8 billion as of Dec. 31. Central States completed a restructuring earlier this month as a result of the payment.
To fund the S&P 500 fund, $4.2 billion was allocated from the UPS payment and $1.2 billion was moved from Goldman Sachs Asset Management, New York, one of the Central States' two named fiduciaries.
Another $900 million of the UPS money went to an existing Lehman Aggregate Bond index fund managed by Mellon, bringing it to a total of $5.4 million.
The remaining $1 billion in UPS money went to Northern Trust Global Advisors Inc., Chicago, Central States' other named fiduciary.
As a result of the restructuring, Goldman Sachs' assignment was reduced to $8.03 billion from $11.7 billion, while Northern Trust's assignment was raised to $8.03 billion from $5.55 billion. Both firms invest in domestic and international equity as well as real estate. Specific asset allocations weren't available.
Mellon Capital Management, San Francisco — a unit of New York-based Bank of New York Mellon Corp. — now manages 20% of Central States assets in the S&P 500 fund and another 20% in the Lehman index fund, while Northern Trust and Goldman Sachs each run 30% of assets.
Central States eventually plans to designate only one named fiduciary and will drop either Goldman Sachs or Northern Trust, according to court filings. Fund executives and court documents did not reveal which firm would be cut or provide a timeframe for the move. Assets from the terminated fiduciary will go to the surviving firm.
Bank of New York Mellon was rehired by fund trustees as master custodian for the entire fund. The court transferred the authority to name the custodian from the named fiduciaries to the Central States trustees, according to court filings
Central States estimates its pension plan was funded between 70% and 75% as of Jan. 1, after the UPS payment, according to a Central States quarterly financial report to participants.
The Central States fund operates under U.S. District Court supervision through a consent decree dating to 1978 with the Department of Labor overseeing the integrity of the fund, which had been the target of corruption.
