News Briefs:ABP adds classical to its music rights collection

HEERLEN, Netherlands — Stichting Pensioenfonds ABP acquired classical-music publisher Boosey & Hawkes from private equity firm HgCapital for £126 million ($248 million), the pension fund's second music rights acquisition this year. The €216 billion ($342 billion) fund made the purchase through Imagem Music, a joint venture between ABP and Dutch music publisher CP Masters, which is actively managing the music rights portfolio, according to a news release from HgCapital.

Earlier this year, ABP spent €140 million to acquire the rights to 90,000 songs from Universal Music Group, New York.

BOSTON — Former Federal Reserve Chairman Paul A. Volcker on April 9 criticized mathematical models used by banks and the Bank for International Settlements in evaluating risks. When “three-sigma events” happen with great frequency, “it tells you the models are no good,” Mr. Volcker told business journalists at a program sponsored by the Joan Shorenstein Center on the Press, Politics and Policy of Harvard University's John F. Kennedy School of Government.

Mr. Volcker said the current financial system is very different from 20 or 30 years ago, when commercial banks played a more critical role. Now, financial engineering has shifted much of the risk to investors though CDOs and CLOs. He also warned of the dangers of reigniting inflation. History “is littered” with examples where governments have overstimulated money supply, he said.

“We don't want to get back to where we were in the 1970s,” Mr. Volcker said. The “shining light” of the current economic problems is that there will be shift away from consumption and toward exports, he said.

Mr. Volcker also critiqued herd behavior by financial institutions piling into risky investments.

ALBANY, N.Y — New York state Comptroller Thomas P. DiNapoli announced the launch of the Green Strategic Investment Program. The program will increase commitments by the $165 billion New York State Common Retirement Fund, Albany, to environmentally focused investments by $500 million over the next three years, according to a news release.

The pension fund has $40 million invested in private equity funds focused on renewable energy and clean technologies. The fund also has more than $440 million in commitments to funds where clean tech is a component of the funds' overall strategy.

Investments made under Mr. DiNapoli's new program will be identified in the comptroller's monthly transaction report. Spokesman Dennis Tompkins did not return calls by press time seeking further details.

DEARBORN, Mich. — Officials at Ford Motor Co. on April 9, in response to shareholder resolutions filed by institutional investors, said they have a detailed plan for reducing greenhouse gas emissions in the vehicles it manufactures by 30% by 2020. The plan provides short-term (through 2012), midterm (2012-2020) and long-term solutions, from “EcoBoost” engines now to fuel-cell cars of the future, Susan Cishke, Ford group vice president, sustainability, environment and safety engineering, said in a conference call.

Ford's announcement led the Connecticut State Treasurer's Office, which oversees the $25.6 billion Connecticut Retirement Plans and Trust Funds, Hartford, to withdraw its climate-related shareholder resolutions. Also removing its resolution was the Interfaith Center on Corporate Responsibility, representing more than $100 billion in investments.

Donald Kirshbaum, investment officer for policy for Connecticut Treasurer Denise L. Nappier, called the move a “significant step forward for Ford and its shareholders” to show how it will compete in “the carbon-constrained economy we now operate in.”

Sister Patricia Daly, a representative for ICCR and a member of the Sisters of St. Dominic in Caldwell, N.J., called Ford's plan a “truly critical development.” Other auto companies have said they'll set goals to reduce greenhouse gas emissions, “but without the detailed game plan that Ford has laid out,” Sister Daly said in the conference call.

MINNEAPOLIS — The $1.4 billion Minneapolis Employees Retirement Fund is expanding its global equities allocation to 15% of total assets from 10%, and will select managers to run the expanded portfolio at its upcoming board meeting in May, said Judith M. Johnson, executive director and CIO. Ennis Knupp will present the fund's board with four to five finalists, Ms. Johnson said. Capital Guardian, which currently manages the fund's $140 million in global equities, can bid for some or all of the expanded $210 million allocation, she said. No decision has been made on the number of managers to be hired.

Funding will come from reducing its U.S. equity allocation to 35% from 40% by terminating Private Capital Management, which ran $70 million in domestic smidcap equities, for performance, she said. Chad Atkins, Private Capital's legal counsel, wasn't immediately available for comment.

FORT WORTH, Texas — American Beacon Advisors is for sale, according to a source familiar with the matter. Parent AMR Corp., which owns American Airlines, retained Credit Suisse as the investment bank to handle the sale, according to the source, a competing investment banker who asked not to be identified. “It will probably fetch between $350 (million) and $500 million,” the source said. Any potential buyer would probably be a private equity firm, and not another asset management firm, given the current market environment, the source said. “Asset managers are looking at their own valuations being hammered,” he said.

Any potential buyer would probably seek a commitment from AMR that it will not pull American Airlines' own retirement assets from the firm once it is sold, the source said.

American Beacon manages $65 billion in assets overall, of which $37 billion are third-party assets, according to a 10-K filed in February.

A spokesman for AMR did not confirm the manager was for sale but, in a written statement, said: “AMR has been involved in an ongoing strategic value review of certain businesses under the AMR umbrella. At this time, we don't have any additional comment on the status of that review. As we have said consistently, we are always looking to determine the best structure and strategy for our businesses to help them grow and reach their full potential. In the process of this review, we are considering the best interests of all stakeholders, including customers, shareholders and employees.”

BOSTON — The $51.8 billion Massachusetts Pension Reserves Investment Management board has decided not to pursue direct hedge fund investing “at this time,” according to an investment committee memo to the board. MassPRIM has invested $2.6 billion with hedge fund-of-funds firms in its absolute return program and another $2.5 billion in its portable alpha program.

SAN DIEGO — The Securities and Exchange Commission has sued five former San Diego city officials in U.S. District Court in San Diego charging them with fraud for allegedly taking actions knowing that they would result in the city's pension plan being underfunded.

Charged on April 7 were Michael T. Uberuaga, former city manager; Edward P. Ryan, former auditor and comptroller; Patricia Frazier, former deputy city manager for finance; Teresa A. Webster, former assistant auditor and comptroller; and Mary E. Vattimo, former city treasurer.

The charges stem from financial statements accompanying five bond offerings in 2002 and 2003. The SEC contends the five former officials knew the city had been intentionally underfunding its pension plan by increasing pension benefits but deferring costs. The SEC also alleges the former officials specifically knew the pension plan's projected unfunded liability would increase from $284 million in 2002 to $2 billion in 2009. The SEC is asking for an injunction and civil penalties.

The SEC already settled with the city's outside auditors on similar fraud charges, Thomas J. Saiz and the accounting firm Calderon, Jaham & Osborn. Both were enjoined from violating the Securities and Exchanges Acts, and Mr. Saiz was ordered to pay a $15,000 civil penalty.

LONDON — Hedge fund manager Man Group announced a new private equity-style unit that will invest in environmentally related projects, confirmed spokesman Paul Downes. Man Environmental Capital Opportunities will sponsor funds that would invest in projects benefiting the environment. The new unit incorporates a e400 million ($630 million) fund that Man Group closed in December, the China Methane Recovery Fund, that will finance electricity generation by extracting methane gas from coal mines in the Shanxi province in China. The fund also aims to generate carbon credits under the Kyoto Protocol.

BOSTON — John Hancock Retirement Plan Services introduced a guaranteed income feature for its new 401(k) plan clients. The optional rider is one of a wave of recent efforts by 401(k) providers to offer steady income to retirees.

The rider permits participants to obtain a lifetime income of 5% of their account balance at the time of distribution, starting at age 59 1/2. If the market value of the account rises, the benefit goes up proportionately, creating a new benefits floor. The rider also offers downside protection; the guaranteed income will not fall from its peak level. Participants who opt for the rider will pay a fee of 35 basis points on their balance.

Edward Eng, senior vice president, said the rider has been included in 25 new contracts signed since the end of January. John Hancock officials plan to make the rider available to existing clients later this year, he said. John Hancock manages $50 billion in 401(k) assets for 1.6 million participants in 40,000 plans.