World Briefs: Edinburgh fund joins class action against Ericsson

EDINBURGH — The £3.2 billion ($6.4 billion) Lothian Pension Fund, Edinburgh, joined a class-action suit against Ericsson LM Telephone Co., claiming the company made false statements about its financial health in 2007.

The pension fund lost $3.2 million of its $18.9 million investment from Feb. 2 to Nov. 20 because of a fall in share price, according to an e-mail from Stewart Argo, media manager for the Edinburgh City Council, which filed the suit on behalf of the fund. Lothian's complaint claims the company reassured investors of continued strong growth in 2007 despite a weakening market. But lower than expected earnings announced Oct. 16 caused the stock price to fall to $23 per share as of Nov. 21 vs. a high of $43.41 July 12.

The Lothian fund joined a suit filed in November by Labaton Sucharow LLP, a New York law firm, on behalf of the $3.1 billion State-Boston Retirement System because it is the fund's policy to “take an active interest in environmental, social, and corporate governance issues and not be merely a passive investor,” Mr. Argo said. Lothian filed its complaint in U.S. District Court in New York in late December.

Ericsson spokesman Fredrik Hallstan said the company did not have details about the lawsuit.

“We don't know what the lawsuit is about right now,” he said. “The court in New York probably knows more than we do at this point.”

GREENWICH, Conn. — Canadian institutional investors will continue to increase foreign investments, especially in public and private equities and real estate, according to a new Greenwich Associates report. Among officials at 257 public and corporate pension plans and endowments interviewed from August to September, 28% said they expect their non-domestic equity allocations to increase “significantly” in the next three years. Foreign equity investments among Canadian institutions have risen to 30% of total assets in 2007 from 25% in 2004. Similarly, as a portion of all equity investments, foreign equity rose to 58% in 2007 from 51% in 2004, according to Greenwich's report.

Although foreign exposure brings currency risk — the sharp rise in the Canadian dollar's value last year hurt many plans with foreign investments, the report says — and despite a growing interest in currency overlay programs, 35% of investors did not have any currency hedges.

“Many funds opt not to hedge their foreign exposure on the belief that, over a long-term investment horizon, currency fluctuations will even out to the extent that hedging is not worth the cost,” Greenwich consultant Rodger Smith said in the report.

Respondents also said allocations to real estate and private equity would increase. Those asset classes' allocations have risen in the past three years, while hedge fund allocations have decreased.

LONDON — U.K. pension funds advised by Watson Wyatt Investment Consulting increased hedge fund allocations by more than 60% in 2007, according to a survey of the 350 funds advised by the firm, with 62 client searches for hedge funds, compared with 28 in 2006. The number of hedge fund-of-fund searches rose to 27 in 2007 from 10 in 2006. “Hedge funds remain a good way to capture both manager skill and ensure diversification,” Paul Trickett, European head of investment consulting at Watson Wyatt, said in a news release. “While funds of hedge funds continue to be popular, single strategies are fast gaining traction among higher governance funds and those wishing to outsource this type of selection exercise.”

Equity mandates continued to be the most in demand for the pension funds in 2007, making up 30% of all manager selections.

HEERLEN, Netherlands — Stichting Pensioenfonds ABP moved investment management and administration of the €216 billion ($328 billion) fund to its wholly owned subsidiary, All Pensions Group, effective Saturday, confirmed Thijs Steger, APG spokesman. All pension fund employees have been transferred to APG. Separating the pension fund and the management company allows for further expansion of services to participants, he said.