WASHINGTON The American Society of Pension Professionals & Actuaries asked the IRS to allow sponsors of hybrid plans to use a combination of equity and fixed-income indexes to determine the market rates of return when calculating participant account balances. Some plans are already using market indexes to determine the rates, but many others are using 30-year Treasury rates clearly approved by IRS guidance.
The ASPPA made its request in a comment letter in response to a proposed regulation to implement key provisions on hybrid plans mandated by the Pension Protection Act of 2006. Judy Miller, ASPPA chief of actuarial issues, said the association also urged the IRS in its comments Thursday to clarify how plans should amend their existing interest rates and other benefit calculations to comply with the new regulations set by the PPA.
Texas ERS looking at 130/30 strategy
AUSTIN, Texas The Texas Employees Retirement System had an educational session on 130/30 strategies, according to recently released board meeting minutes. Scott Bondurant, senior equity strategist at UBS Global Asset Management, told the board at its Feb. 27 meeting that 130/30 could deliver double the alpha of long-only equity portfolios 250 to 500 basis points of added returns vs. 200 to 250 bps. The board has talked about 130/30 as an option that is out there, Texas ERS spokeswoman Mary Jane Wardlow said in an e-mail. There has been no serious discussion at this point, one way or the other.
CalPERS seeks support from Lilly shareholders
SACRAMENTO, Calif. CalPERS is asking Eli Lilly and Co. shareholders to oppose re-election of three directors and support its proposal to allow shareholders to amend company bylaws by majority vote.
In a statement released today, the $237.5 billion California Public Employees Retirement System, Sacramento, urged shareholders to withhold votes on the re-election of Alfred G. Gilman, Karen N. Horn and John C. Lechleiter. It was on their watch that Eli Lilly experienced severe stock underperformance, poor corporate governance practices, and was unresponsive to shareowners, said CIO Russell Read in the statement.
The statement also said Eli Lilly shareowners now do not have the right to institute bylaw amendments by any vote, which is allowed by about 95% of companies in the S&P 500 and Russell 1000. CalPERS owns 4.7 million Eli Lilly shares.
Philip C. Belt, Eli Lilly director-corporate communications, said in a statement: The board believes that allowing the bylaws to be amended by a simple majority would expose the shareholders to the risk that a few large shareholders, who have no duties to other shareholders, could use the bylaws to advance their own short term special interests.
Lilly also disagrees with CalPERS' assessment of Lilly board members, Mr. Belts statement said. As for stock performance, CalPERS chose to look at time periods for which the comparisons suited their perspective. The Indianapolis-based companys annual meeting is April 21.
Group urges rejection of 2 WaMu directors
Washington Mutual Inc. shareholders are being urged by CtW Investment Group to vote against the re-election of directors Mary E. Pugh and James H. Stever.
Ms. Pugh, chair of the finance committee, and Mr. Stever, chair of the human resources committee both of which are charged with risk management oversight and compensation plan design bear responsibility for Washington Mutuals failure to recognize and act in a timely manner on the risks to shareholder value presented by the housing bubble, and for attempting to insulate executive bonuses from the consequences of this risk management failure, said a letter e-mailed to 30 to 50 of the largest shareholders. Richard W. Clayton III, CtW research director, said the group also is mailing the letter to about 80% of the companys shareholders. CtW Investment Group works on shareholder issues with pension funds sponsored by labor unions affiliated with Change to Win, a coalition of unions. Washington Mutuals annual meeting is April 15.
Libby Hutchinson, Washington Mutual senior vice president and manager public relations, said in a statement, Three directors and our CEO met with CtW at length to demonstrate the boards active engagement in formulating and overseeing managements implementation of credit policy. In addition, the directors clearly communicated in the companys proxy statement and reiterated to CtW in the meeting that WaMus 2008 executive compensation plans will pay for performance and align executive compensation with increased shareholder value.
DOL orders $1.5 million restored to 401(k)
Associated Technical Training Services Inc., Seneca, S.C., was ordered by the Department of Labor to restore $1.5 million to the companys 401(k) plan, according to a DOL news release. The size of the fund could not be learned.
The Labor Department obtained the consent judgment in U.S. District Court. Under the judgment, the defendants agreed to restore $1,269,881 in losses plus $253,346 in lost interest. The judgment also bars the company and plan trustee Leslie M. Schile from serving as fiduciaries to any plan covered by ERISA. The Labor Department alleged that the plans fiduciaries caused losses through mismanagement and acts prohibited under ERISA by making imprudent investments and improper loans.
San Antonio monitoring portable alpha
SAN ANTONIO San Antonio Fire & Police Pension Fund is reviewing its $100 million portable alpha strategy following its Feb. 19 investment committee meeting to monitor portable alpha going forward, confirmed Bart Moczygemba, chairman of the $2.2 billion plans investment committee.
The strategy, adopted in mid-2006 to improve the funds fixed-income allocation, underperformed in the past 12 months, according to meeting minutes. Mr. Moczygemba said there are six managers in the strategy and that not all were underperforming. He declined to name the managers.
Although the fund had no direct subprime exposure, it suffered in the sell-off that ensued as many fixed-income investors became risk averse, the minutes said. This aversion to risk caused many securities to be sold off, which impaired valuations (on a mark-to-market basis) in the funds enhanced cash allocation within the portable alpha strategy.
The fund will redirect to hedge fund-of-funds manager Ironwood Partners $3 million in funding from cash intended for Declaration Management & Research, an enhanced cash manager in the portable alpha program. Also, future cash flows once earmarked for Declaration will be redirected to other managers in the portable alpha program. A call to Declaration was not returned by press time.
Internal management among suggestions for pool
TALLAHASSEE, Fla. Florida State Board of Administrations Local Government Investment Pool would return to internal management under a tentative recommendation by consultants evaluating the $10 billion pool, according to Kevin SigRist, deputy executive director of the $187.5 billion FSBA. The potential cost saving of such a move was described to be on the order of $600 million over 30 years, Mr. SigRist said in a memorandum. The memo said the FSBA hasnt prepared a definitive analysis on costs.
The recommendation was made by Tanya Styblo Beder, chairman of SBCC Group, a risk management consulting firm, and Thomas Tew, attorney with the law firm of Tew Cardenas. Both were hired in February by the Florida House as part of its special task force evaluating the Local Government Investment Pool. Mr. SigRist wrote his memo to Ms. Beder and Mr. Tew.
The consultants also recommended creating a new local government investment pool and closing the existing pool to new deposits, the memo said. Mr. SigRist based his response on a presentation of the recommendations at a meeting, noting in his memo we have not been provided with any written documentation of the analysis.
Federated Investors was hired, effective March 1, to manage the $8.7 billion Local Government Investment Pool A and $1.5 billion Pool B. It took over from interim manager BlackRock, which was hired in November. Before then, the pool was internally managed by the SBA and had some $30 billion in assets before reports of subprime credit-related investment problems caused a run of withdrawals last fall.
Michael P. McCauley, senior corporate governance officer and SBA spokesman, couldnt be reached for comment.
Separately, state Rep. Carl Domino is planning to introduce legislation that would require the SBA to mark to market investments in the LGIP in an effort to restore confidence in the short-term fund.
The key to restoring confidence in the pool is marking to market, Mr. Domino said. When (SBA staff) failed to mark to market, trustees (and participants) didnt understand how the pool had deteriorated.
Seattle keeps eye on Snow Capital
SEATTLE Seattle City Employees Retirement System placed domestic equity manager Snow Capital Management on watch because of lagging investment performance, according to recently released minutes from the system boards Feb. 28 meeting. The board will continue to monitor Snows performance through Sept. 30, at which time the firm will be re-evaluated for performance, according to the minutes.
The $2.1 billion retirement systems 2006 annual report showed Snow investing $58 million for the fund as of Dec. 31, 2006, the latest information available; the firm manages large-cap value for the city fund, according to the 2008 Money Market Directory.
Were contrarian investors and the second half of last year was difficult for us, said David Jack, managing director at Snow Capital. We met with the investment committee and reminded them of our investment approach and portfolio structure and they chose to stay with our strategy.
Further information was not available. Mel Robertson, CIO of the fund, did not return a phone call seeking comment by press time.
New Jersey divests stock worth $360 million
TRENTON, N.J. The New Jersey State Investment Council, which oversees $77.7 billion in assets, is divesting $360 million in stock investments related to 11 companies that conduct business in Iran, spokesman Tom Vincz said March 24.
The divestiture was made in accordance with a state law that took effect in January. The divestiture mostly involves energy companies, such as Russias large conglomerates Lukoil and Gazprom.
The legislation requires the divestiture to be completed within three years. The Legislature had previously required the divestiture of investments tied to Sudan, which stand at $2.2 billion.
PBGC takes over Alaska forest group plan
WASHINGTON The PBGC on March 24 assumed responsibility for the pensions of more than 2,300 workers and retirees of a pension plan sponsored by the Alaska Forest Association Inc., Ketchikan. The AFA pension plan was 47% funded, with assets of $40.6 million to cover $85.5 million in liabilities, when the plan was terminated June 1, 2005, a PBGC news release said. The PBGC, which became the plans trustee Feb. 11, expects to be responsible for $43.1 million of the $44.9 million shortfall, the release said.
Montana seeks law firm for litigation monitoring
HELENA, Mont. The Montana Board of Investments is searching for at least one law firm to handle securities class-action claims, confirmed Executive Director Carroll South. Services would range from monitoring for possible claims to litigation.
Barrack, Rodos & Bacine now provides services on a less formal basis; it can bid on the RFP.
The board oversees $13 billion, including $8.2 billion in pension assets. The RFP is available on the boards website at http://gsd.mt.gov/business/pdfdownloads/RFP08-1493D.DOC. Questions should be directed to Devin Garrity, procurement officer, at 406-444-3366 or [email protected] Responses are due April 18.
5 on CalPERS focus list
SACRAMENTO, Calif. The California Public Employees Retirement System put five companies on its annual focus list for poor financial performance and corporate governance practices: The Cheesecake Factory Inc., La-Z-Boy Inc., insurance brokerage firm Hilb Rogal & Hobbs Co., health-care equipment supplier Invacare Corp. and homebuilder Standard Pacific Corp.
Each company on the list is a poster child for bad performance and bad corporate governance and (has) made no effort to change their practices, said Eric Baggesen, CalPERS acting senior investment officer of global equity, in a conference call.
The $237.5 billion plan is pushing to eliminate staggered boards of directors at The Cheesecake Factory, Hilb Rogal & Hobbs, La-Z-Boy and Standard Pacific. It is also conducting a no vote campaign against directors up for re-election at all of the companies annual meetings.
CalPERS owns $6 million of stock in The Cheesecake Factory, which returned 6% vs. a 140.5% industry peers return for the five years ended Feb. 29. The plan opposes supermajority voting requirements to amend company bylaws and the boards staggered terms. CalPERS also wants a clawback policy to recoup executive pay based on fraudulent behavior or inflated performance.
Hilb, Rogal & Hobbs trailed peer performance by 42.3% in the five years ended Feb. 29. CalPERS opposes supermajority voting requirements, the staggered board and the absence of majority vote and clawback policies. CalPERS holds $4.9 million in company stock.
Invacare underperformed by 122.7% in the five-year period, has a staggered board and lacks a majority vote policy. CalPERS investment is $10.3 million. La-Z-Boy lagged peers by 40.9% over the past five years and has a staggered board. CalPERS investment is $3.5 million. And homebuilder Standard Pacific underperformed over the past five years by 79.4%. CalPERS investment is $1.5 million, and it seeks removal of staggered board terms and supermajority requirements, and adoption of a majority vote policy.
Dale LaPorte, senior vice president and general counsel for Invacare, said the company is disappointed CalPERS put it on the list, especially because it agreed to many of the plans requests, including adding a clawback policy and removing supermajority requirements, and because Invacares stock return relative to peers was 26.8% for the year ended Feb. 29. Others on the list also made some concessions.
But Invacare will not budge on changing its staggered, or classified, board. We continue to believe the classified board is in the best interest of long-term shareholders, Mr. LaPorte said.
La-Z-Boy officials also disagree with CalPERS regarding its staggered board, said company spokeswoman Kathy Liebmann. We think weve been very proactive in ensuring the company has good corporate governance policies, she added.
The other companies on the list did not respond by press time to requests for comment.
Louisiana law chips away at unfunded liabilities
BATON ROUGE, La. Louisiana Gov. Bobby Jindal signed a law March 24 to provide $40 million to the $16 billion Teachers Retirement System of Louisiana and $20 million to the $9 billion Louisiana State Employees Retirement System, both of Baton Rouge. The money will accelerate the payoff of unfunded accrued liabilities. The money would come from the states $1.1 billion surplus from the 2006-07 fiscal year. According to the governors website, the state will save $4.28 in interest for every dollar the state invests now.We are pleased to receive the appropriation of $40 million to pay down the unfunded accrued liability, Lisa Honore, public information director for TRSL, said in an e-mail. This payment helps the system move toward full funding which, in turn, benefits our members and the state.
Ms. Honore said TRSLs current unfunded liability is $6.3 billion. Bobby Beale, CIO of LASERS, said his systems unfunded accrued liability is around $4.1 billion.
Governor stops funding for pension move
CHARLESTON, W.Va. West Virginia Gov. Joe Manchin III has vetoed $24.5 million in state funding to help subsidize a shift of assets from the states Teachers Defined Contribution Plan to the West Virginia Teachers Retirement System.
But in a March 21 statement, Mr. Manchin said he would call a special legislative session to provide the funding if 75% of the 19,000 TDC participants approve the transfer by May 15, as required by provisions of a recently approved state law.
Under the new law, the transfer can go forward if at least 65% of the TDC participants approve of the shift. Also under the law, state funds would be provided to subsidize the pensions of TDC participants only if at least 75% of the TDC participants approve the shift, said Anne Werum Lambright, executive director of the states Consolidated Public Retirement Board, Charleston, in an interview.
Ms. Lambright said she agreed with the governors analysis because there wont be a need for the money unless at least 75% of TDC participants approve the merger.
The governor and state legislators have been working on a way to encourage a migration to the DB plan since the state Supreme Court in January blocked a long-pending effort to merge the plans.
The $908 million Teachers Defined Contribution Plan, which has been closed to new employees since July 1, 2005, and the $3.6 billion teachers Retirement Plan, both in Charleston, were originally scheduled to merge July 1, 2006.
Shareholders urged to reject say-on-pay proposal
VIENNA, Va. Morgan Stanley shareholders were advised by Proxy Governance to vote against a proposal on an annual shareholder advisory vote on executive compensation, or say on pay, and against the re-election of C. Robert Kidder as a director over a breakdown in risk management oversight, according to a report by the corporate governance research firm.
The $850 million American Federation of State, County and Municipal Employees staff pension plan, Washington, sponsored the say-on-pay proposal.
We believe that the companys executive compensation levels relative to its peers are reasonable and the compensation program is adequately disclosed, Proxy Governance said in its report. Proxy Governance recommends opposing the re-election of Mr. Kidder to hold him accountable for oversight failure as chair of the audit committee in 2005 when a critical risk management decision was made that overstepped the role of the committee, the report said. Better oversight could have helped prevent credit-related losses, the report said.
Report details Social Security deficit
WASHINGTON The costs of the nations Social Security and Medicare programs continue to be unsustainable under current financing arrangements, said trustees of both programs in a report issued March 25.
Without reforms, cash flows for Social Security will turn negative in fewer than 10 years, meaning the U.S. will have to draw on general revenue to support withdrawals from the Social Security trust funds to pay current benefits, said Treasury Secretary Henry M. Paulson Jr. at a press briefing. Trust funds for the Social Security program are expected to be exhausted by 2041. Social Securitys unfunded obligation equals $4.3 trillion over the next 75 years and $13.6 trillion on a permanent basis.
To make the system whole on a permanent basis, the combined payroll tax rate would have to be raised immediately by 26% (from 12.4% to about 15.6%), or benefits reduced immediately by 20%, Mr. Paulson said. The sooner we take action to strengthen Social Securitys financial footing, the less drastic the needed reforms will be and the fairer reforms will be to future generations.
Home prices in record fall; consumer expectations at 35-year low
NEW YORK Standard & Poors on March 25 said its S&P/Case-Shiller home price index dropped by a record 10.7% in January, its 13th straight month of decline.
Reflecting the impact of the housing slump, a separate report released by the Conference Board showed its index monitoring consumer expectations for the coming six months fell to 47.9 in March from 58 in February, its lowest reading since December 1973.
Declines in the prices of existing single-family homes across the U.S. continued into the new year, with 16 of the 20 reporting (metropolitan areas) posting record low annual declines, of which 10 are in double digits, S&P said in its report.
The steepest year-over-year declines were recorded in Las Vegas and Miami, both down 19.3%; Phoenix, 18.2%; San Diego, 16.7%; Los Angeles, 16.5%; and Detroit, 15.1%. Only one of the 20 markets, Charlotte, N.C., which was up 1.8%, did not show a year-over-year decline. New York and Chicago, the largest and third-largest markets, dropped 5.8% and 6.6%, respectively.
William Blair creates new growth fund
William Blair & Co. started the William Blair Emerging Leaders Growth Fund, confirmed spokesman Tony Zimmer. The fund, launched Wednesday, plans to invest at least 80% of its assets in emerging markets growth companies with capitalizations of at least $5 billion. The fund plans to invest in 30 to 60 companies, Mr. Zimmer said. It will be managed by Jeffrey Urbina, principal and a co-manager of the $1 billion Emerging Markets Growth Fund and the manager of William Blairs $391 million International Small Cap Growth Fund. William Blair has $58 billion under management, $33 billion of which is for institutional clients.
Canadian board clears BCE buyout
TORONTO The proposed C$51.7 billion (US$50.8 billion) buyout of BCE Inc. by a group of investors that includes the Ontario Teachers Pension Plan won approval from the Canadian Radio-television and Telecommunications Commission, according to an agency news release.
Approval is conditional and assumes control of the countrys largest communications company will remain Canadian. Consistent with previous decision, we have imposed conditions to address our concerns relating to corporate governance (to) ensure that control of BCE remains in Canadian hands once the transaction is completed, Konrad von Finckenstein, chairman of the CRTC, said in the release.
In taking the company private, the C$106 billion (US$ 104.3 billion) teachers plan would purchase about 50% of non-voting shares, worth up to C$4 billion, according to the funds website. Providence Equity Partners would buy 20% each voting and non-voting shares, while Madison Dearborn Capital Partners and Merrill Lynch Global Partners Inc. would buy less than 10% of each voting and non-voting shares.
Investors and BCE agreed on the deal June 30, 2007, which includes debt and other interests. Further regulatory approval is pending.
CFOs see value of green, survey says
CFOs believe adoption of environmental sustainability practices and metrics improve shareholder value and create other financial advantages for their companies, according to a survey commissioned by Jones Lang LaSalle.
More than half of financial executives responding believe their companies would improve investor returns and shareholder value through sustainability practices, said spokesman Craig Bloomfield in an interview. The survey said 24% of respondents believe sustainability would very likely improve shareholder value, while 30% believe it somewhat likely.
The most often cited benefit was the likelihood of the reduction of risk, cited by 78% of respondents, according to a statement about the survey.
In corporate sustainability, regulatory compliance was ranked as a high priority by 61% of respondents and a midlevel priority by 26% of respondents. Improving energy efficiency and reducing greenhouse gas emissions was ranked as a high priority by 47% and a midlevel priority by 32%.
The greatest barriers to incorporating sustainability into financial strategies include the inability to measure the effects of sustainability on shareholder value, cited by 46% of respondents; inability to document the effects on financial performance, cited by 37%; and a lack of standard decision-making frameworks that consider environmental factors, 36%, the statement said.
The survey of 175 CFOs and senior finance executives was conducted by CFO Research.
Most CFOs seeing recession
CFOs largely believe the U.S. economy has entered a recession, according to a survey of U.S. corporate CFOs conducted by Financial Executives International and the Zicklin School of Business of Baruch College.
Of the 209 CFOs interviewed March 3, 41% said the U.S. is currently in recession and 32% believe it will go into recession in the next six months, the survey said. Only 18% did not believe the U.S. would have a recession in 2008. The CFOs believe both recession concerns and the decline in the U.S. dollar are affecting business.
While 34% reported that the weakness of the U.S. dollar has led to increased international sales, 51% have seen an increase in the costs of commodities and raw materials and 33% say their companies quarterly earnings have decreased, said a statement about the survey.
This quarters data points to a continued decline in optimism among CFOs, Michael P. Cangemi, FEI president and CEO, said in the statement. With the permeation of pessimism, the survey revealed two-thirds of companies identifying some type of cutbacks, specifically in the areas of layoffs and reduced hiring. It is now more important than ever for CFOs to identify efficiencies and conduct smart business.
Shareholder sues over CME-Nymex merger
CHICAGO A Nymex Holdings shareholder filed a class-action suit against the parent of the worlds largest energy exchange and CME Group for grossly inadequate consideration of the proposed $8.9 billion merger, an attorney for the plaintiff said March 19.
Shareholders are not receiving a fair price, said Mark Rifkin, an attorney with the law firm Wolf Haldenstein Adler Freeman & Herz, who represents Nymex shareholder Cataldo Capozza.
The case was filed in the Delaware Chancery Court on March 17, as the CME announced an agreement to buy Nymex, the parent of the New York Mercantile Exchange, in a stock-and-cash deal then valued at $8.9 billion. The case also alleges breach of fiduciary duties over the proposed merger and cites Nymex directors as co-defendants.
When the merger negotiations were first announced Jan. 28, the deal was then valued at more than $11 billion, based on the CME share price at the time.
Mr. Rifkin said Nymex shares have significantly declined since the terms of the CME offer were disclosed because the price was too low. Spokesmen for both Nymex and the CME declined comment.
W.P. Carey settles SEC charge
WASHINGTON W.P. Carey & Co. agreed to pay about $30 million to settle SEC charges alleging that company executives provided kickbacks to a broker-dealer for selling the companys REITs, according to an SEC news release.
The SEC alleged that the company under an arrangement run by John J. Park, the companys former CFO, and Claude Fernandez, the former chief accounting officer paid almost $10 million in undisclosed compensation to an unidentified broker-dealer to sell the REITs between 2002 and 2003. The SEC claimed the payments came from cash assets in the REITs.
According to the SEC, such payments are required to be disclosed to investors. The SEC alleged the payments also violated a NASD rule limiting compensation to broker-dealers who sell REITs to 10% of the total proceeds raised.
The settlement comprises $20 million in disgorgement and interest and $10 million in penalties, according to the news release.
Mr. Parks settlement includes a $240,000 fine and a provision barring him from serving as an officer or director of a public company for five years. Mr. Fernandezs settlement includes a $75,000 fine and a two-year suspension from appearing before the SEC as an accountant, the release said.
The defendants not only failed to disclose the payment of additional compensation to the brokerage firm selling W.P Careys REITs, but also went to great lengths to conceal the additional payments, said Mark K. Schonfeld, director of the SECs New York Regional office, in the news release.
Susan Hyde, W.P. Carey managing director and director of investor relations, did not return telephone calls by press time.
Aite report: Quant analysis growing in importance
BOSTON Quantitative analysis is taking a larger role globally in investing, with quant hedge fund and overall assets under management reaching $160 billion and $10.86 trillion, respectively, by 2010, according to a new Aite Group report. Quant hedge funds representing $98.8 billion accounted for more than 5% of global hedge fund AUM at the end of 2007, the study said, while quant analysis drove 12% of all global AUM, representing $6.65 trillion. Growth in hedge funds, electronic and algorithmic trading, and proven quant-based performance and other factors will contribute to that growth.
Survey: Cash still king among fund managers
NEW YORK Cash levels among global fund managers set another record in March as the risk tolerance of the managers remained low, according to a monthly survey by Merrill Lynch. A record 42% of fund managers surveyed earlier in March said they were overweight cash, according to a Merrill Lynch news release. Thats up from the previous high of 41% a month earlier. Meanwhile, the fund manager survey composite indicator for risk and liquidity in March was 31, unchanged from last month but down from a long-term average of 42.
The sinking equity markets havent turned managers off from equities, said the release. A quarter of respondents believe equities are attractive, undervalued on an absolute basis and relative to bonds.
Merrill Lynch surveyed 193 fund managers globally March 7-13; the managers run a total of $676 billion.
S&P 500 companies spend more on board study
PORTLAND, Maine Companies in the S&P 500 spent an average of $2.194 million on total compensation to their boards of directors in the past year, according to a study of 3,085 U.S. corporations released March 18 by The Corporate Library. By contrast, all of the corporations in the study spent an average of $1.079 million on total board compensation.
American International Group Inc., Honeywell International Inc. and Northrop Grumman Corp. were among nine companies that paid more than $2 million in the cash component of total compensation to the board, the 23-page study said.
Total compensation includes cash payments, equity awards and changes in value of pensions and non-qualified deferred compensation amounts. The data cover the corporate proxy statements filed by Aug. 31. Last year was the first time the SEC required companies to disclose total compensation paid to directors, the study noted.
In the previous year, based on a TCL study of data it collected on 2,815 companies, the average total board compensation was $950,600. For those same 2,815 companies in its latest study, the average total was $1,126,002.
Withdrawal liability funded ratio better in 07
NEW YORK Multiemployer plans improved their average withdrawal liability funded ratio to 84% in 2007 from 81% the previous year, but poor equity markets in recent months do not bode well for another improvement in 2008, according to a Segal Co. report.
Multiemployer plans fully funded for vested benefits, thus without a withdrawal liability, rose to 17% from 14% the previous year, the report said.
Withdrawal liability funded ratio measures the percentage of funding of vested benefits. Employers withdrawing from the plans have to pay a liability to the plans whose assets fall below the present value of the vested benefits.
Funding improved through a combination of favorable investment performance and interest rates, Mary L. Feldman, senior vice president and director of public affairs, said in an interview.
For the study, Segal examined 402 plans across a range of industries with a combined $152 billion in assets, from seven plans each with less than $5 million in assets to eight plans with more than $4 billion each.
Russell announces index revamp schedule
TACOMA, Wash. Russell Investments will begin the reconstitution schedule for its equity indexes by posting lists of probable additions and deletions for the Russell 3000 index and the Russell Global indexes after the markets close June 13, the company said in a statement. It will post updated lists, if necessary, after markets close June 20 and June 27, when component changes to the Russell indexes will take effect for the next 12 months. Reconstitution is an essential element for truly representative benchmarks in order to systematically mirror changes in the equity market, such as capitalization and style movement globally, said Lori Richards, director of client service for Russell Indexes.
Sharpe wins 2008 Graham and Dodd Award
CHARLOTTESVILLE, Va. William F. Sharpe will receive the 2008 Graham and Dodd Award for his article Expected Utility Asset Allocation, the CFA Institute announced March 25.
The award recognizes the most outstanding article published in the previous year in the Financial Analysts Journal and is awarded by the FAJs advisory council and editorial board. Mr. Sharpes article appeared in the September/October 2007 issue. In his article, Mr. Sharpe takes asset allocation beyond a typical approach of using a mean-variance approach for analyzing the trade-off between risk and expected return, a CFA statement said. The CFA Institute, an association of investment professionals, publishes the FAJ.
Mr. Sharpe, who received the 1990 Nobel Memorial Prize in economics, is STANCO 25 professor of finance emeritus at Stanford University and founder of Financial Engines Inc. He also received the Graham and Dodd Award in 1973 and 1998.
Mr. Sharpe will be presented the award, which has no monetary prize, at a CFA Institute-sponsor Financial Analysts Seminar in St. Charles, Ill., July 21.
SSgA starts ETF tracking global bond index
NEW YORK SSgA launched a new ETF that tracks Deutsche Banks DB Global Government ex-U.S. Inflation-Linked Bond Capped index, confirmed SSgA spokeswoman Marie McGehee. The SPDR DB International Government Inflation-Protected Bond ETF began trading March 19 on the American Stock Exchange. The index includes 120 inflation-indexed bonds from 18 developed and emerging countries outside of the U.S. Demand for international inflation-linked bond exposure has increased significantly in recent years as investors look to improve the risk-return profile of their portfolios by hedging against inflation and U.S. dollar exposure while improving diversification, said James Ross, senior managing director at State Street, in a news release.
BNP Paribas, Saudi bank create joint venture
RIYADH, Saudi Arabia BNP Paribas Investment Partners and Saudi Investment Bank on March 19 agreed to form SAIB BNP Paribas Asset Management, a new Saudi-based asset management joint venture. BNP Paribas Investment Partners will take a 25% stake through its holding company, BNP PAM Group. The deal is still subject to regulatory approval. This new operation will strengthen BNPP IPs position as a leader in new markets, where we already hold more than $54 billion of assets under management, via (joint ventures) and operations in Argentina, Brazil, China, Korea, India, Morocco and Turkey, Gilles Glicenstein, CEO of BNPP IP, said in a news release on the joint venture.
Northern Trust adds to SRI tracking capability
CHICAGO Northern Trusts compliance monitoring capabilities now includes tracking companies that do business with nations identified by U.S. legislation or government authorities as supporting terrorism or human rights violations, that violate Shariah law, or that have industry ties to or are investors in land mines or cluster bombs, spokeswoman Alexis Geocaris confirmed. Compliance Analyst, a web-based monitoring tool, alerts institutional investors when a portfolio is nearing or has violated a clients governance or socially responsible investment policies. RiskMetrics provides monitoring data for Northern Trust.
BGI launches pre-emerging markets fund
SAN FRANCISCO BGI has opened the BGI Frontier Markets Fund, a collective investment trust exclusively for institutional investors that offers exposure to equities in 16 pre-emerging markets, confirmed spokesman Lance Berg. The fund will be benchmarked to the MSCI Frontier Markets index. Countries in which assets will be invested are: United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, Kazakhstan, Ukraine, Croatia, Slovenia, Romania, Bulgaria, Estonia, Tunisia, Mauritius, Vietnam and Sri Lanka. Average GDP growth for these markets from 2001 to 2005 was 5.5%, compared with 4.25% for emerging markets and 2.75% for the U.S.
Principal adds target-date portfolios
DES MOINES, Iowa Principal Funds added five new portfolios to its Principal LifeTime target-date funds series for 401(k) plans, said spokeswoman Joelle Klein. The funds were originally offered in 10-year increments, and the new portfolios provide Principal LifeTime funds at five-year intervals from 2010 through 2055.
Terror-free indexes set for release
FTSE Group and Conflict Securities Advisory Group will introduce a series of terror-free indexes March 31, screening out 222 companies, said Jerry Moskowitz, president of FTSE Americas.
FTSE CSAG Terror-Free Index Series will apply CSAGs screening to the FTSE All-World ex-U.S. index and its component FTSE All-World Developed ex-U.S. and FTSE All-World Emerging ex-U.S. indexes. It will exclude companies with non-humanitarian business ties to Iran, Sudan, Syria and North Korea that expose them to global security risk. Companies identified as involved in humanitarian business, mainly pharmaceuticals and food, will stay in the indexes.
U.S. companies arent involved in the indexes because U.S. law already prohibits doing business with these countries, Mr. Moskowitz said.
The screen reduces the FTSE All-World ex-U.S. index to 1,970 companies with a combined market capitalization of $12.6 trillion, from 2,192 companies with an $18.3 trillion market cap, according to FTSE data.
FTSE will release the names of excluded companies when the new indexes are unveiled, Mr. Moskowitz said. The new indexes were created to help public pension funds, endowments and other institutions comply with requirements on divestment and to meet other investor demand, Mr. Moskowitz said.
Northern Trust licensed the indexes for commingled funds and agreed to create an ETF, pending license negotiation and SEC approval, said Mr. Moskowitz, noting FTSE is also seeking license deals with other investment companies. Alexis Geocaris, Northern Trust spokeswoman, declined to comment.
BNY ConvergEx to offer Plexus cost analysis
NEW YORK BNY ConvergEx Group will offer Plexus Plan Sponsor Groups transaction cost analysis services to its plan sponsor clients worldwide as part of a new partnership between the two firms, confirmed Patrick Phalon, BNY ConvergEx spokesman. The firms also will work together to improve transaction cost analysis and risk measurement services for each companys clients, Mr. Phalon said.
Russell beefs up target-date arsenal
TACOMA, Wash. Russell Investments launched six new funds. Five are target-date funds: the 2015 Strategy Fund, 2025 Strategy Fund, 2035 Strategy Fund, 2045 Strategy Fund and 2050 Strategy Fund, according to a news release. The sixth fund, the In Retirement Fund, is intended for investors who are no longer working. Russell already offers four target-date funds: the 2010 Strategy Fund, 2020 Strategy Fund, 2030 Strategy Fund and 2040 Strategy Fund.
As this product category has developed, our clients have asked for five-year increments, and were happy to be able to bring ours to market, said Matt Smith, managing director of Russell Retirement Services, in the release.
The funds shift to a more conservative mix of bonds to stocks as the target year approaches. The In Retirement Fund keeps a 32% equity/68% fixed-income allocation.
DWS Scudder offers new tool for DC plans
CHICAGO DWS Scudder Distributors Inc. launched ClientScope, a tool to help sponsors evaluate whether the fees they pay for their defined contribution plans are competitive, while also addressing fiduciary responsibilities, said spokeswoman Rosalia Scampoli. ClientScope examines investments, administrative services, ERISA/compliance, communication and education, and recommends enhancements to improve the plan.