Legg, State Street cut staff

Legg Mason, parent company of money managers Western Asset Management and Legg Mason Capital Management, laid off roughly 8% of its staff, or just less than 200 people. State Street Corp., parent of State Street Global Advisors, announced it would cut 6% of its worldwide work force — between 1,600 and 1,800 positions — by March 31.

In both cases, the layoffs were part of cost-cutting programs in response to severe market conditions.

Legg spokesman Mary Athridge said the layoffs don't include investment professionals working at the parent's money management affiliates; executives at the affiliates make their own decisions on staffing.

About two-thirds of the State Street jobs to be cut will be in North America, but a spokeswoman declined to say how many people would be let go at the money management arm.

The $39.3 billion Massachusetts Pension Reserves Investment Management board is sticking with its portable alpha program despite some shaky recent results, said Michael Travaglini, executive director.

Amid reports of other public funds suffering major losses with the strategy, Mr. Travaglini said PRIM continues to expect long-term gains from its program, which accounts for roughly 6% of its portfolio.

With the unprecedented market volatility, both sides of the system's portable alpha program — its broad Russell 3000 equity exposure and its hedge fund-of-funds investments — have sustained losses this year, with the 15% decline of the hedge fund component particularly disappointing, Mr. Travaglini said. Over the long term, the gains should exceed the losses, he said.

The $27 billion Pennsylvania State Employees' Retirement System will continue to review its holdings of swaps, as the derivatives investments remain under selling pressure amid the global market sell-off, said spokesman Robert Gentzel.

“We have been dialing back the exposure to swaps in this environment. We have already not been renewing them and some swaps (contracts) have been terminated early. There'll continue to be some adjustments in terms of lessening this swap exposure,” Mr. Gentzel said.

The fund has made no decision on dropping swaps entirely.

PennSERS' swaps portfolio based on the S&P 500 and MSCI EAFE indexes peaked at $8.6 billion in the first quarter of 2007, Mr. Gentzel said; now, the fund holds only about $2 billion worth.

FASB expects to introduce a comprehensive reorganization of accounting standards and other pronouncements on July 1, 2009, making it the sole authority for non-governmental U.S. generally accepted accounting principles.

Once introduced, the codification will supersede all other reference materials, including that of the American Institute of Certified Public Accounting, FASB Emerging Issues Task Force and FASB's existing authoritative literature, according to a statement from the Financial Accounting Standards Board.

The proposed FASB Accounting Standards Codification “does not change GAAP; instead, it introduces a new structure, one that is organized in an easily accessible, user-friendly online research system,” the statement said.

The codification, which also includes relevant SEC guidance and interpretations, “reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure,” the statement said.

FASB expects to approve the proposed codification, now available for public comments at http://asc.fasb.org, before its July 1 introduction.

Harvard University's endowment fund lost at least 22% in value in the four months ended Oct. 31, a Harvard spokesman confirmed.

A letter to the university's council of deans on Dec. 2 from Harvard University President Drew Faust and Executive Vice President Edward Forst said that the university should plan for “a scenario in which the endowment would be down 30% in value for the year” — which would far exceed its previous worst decline of 12.2% in fiscal year 1974. Over the subsequent 34 years, Harvard's endowment has declined annually only three times, with relatively modest retreats ranging from 0.5% to 3%. The endowment had $36.9 billion as of June 30.

The two wrote that the estimated 22% decline through October doesn't fully reflect the damage suffered by harder-to-value asset classes such as private equity and real estate. The turmoil in global markets “has affected all major asset classes in which the endowment is invested,” according to the letter.

Robert Borden, CIO of the $25 billion South Carolina Retirement Systems, will be paid his annual bonus of $176,000 immediately, despite a challenge from State Treasurer Converse Chellis.

Mr. Chellis opposed the bonus payment amid state funding declines and employment cuts, and because the system had lost money during the current economic crisis.

According to a spokesman for Mr. Chellis, the system's investment commission voted 4-1 not to defer the bonus payment, but the contract stipulation might be reviewed in the future.

The bonus is 50% of Mr. Borden's $352,000 annual salary.

The average U.S. pension plan's funded status dropped to 75% as of Nov. 30 after being fully funded at the start of the year, according to an analysis by Merrill Lynch.

Interest rates have dropped 75 basis points since October, increasing the average liability by more than 11% in November alone, said Gordon J. Latter, Merrill Lynch research analyst.

“The first part of the decline was equity markets and capital markets, and discount rates took it the rest of the way,” Mr. Latter said.

The funded status could drop another 5% to 10% by the end of the year because of a significant drop in the equities markets and a decline of roughly 25 basis points in investment-grade yields at the beginning of December.

Intermountain Healthcare will suspend employer contributions to its $1.19 billion employee 401(k) Savings Plus plan in 2009. The employer match generally is up to 3%.

The $10.1 billion Kansas Public Employees Retirement System would have its employer contribution rate cap increased to 1%, from 0.6% of a worker's salary, starting in 2012, according to a proposal by state Sen. Stephen Morris, co-chair of the Kansas Legislature's Joint Committee on Pensions, Investments and Benefits.

The increase would raise state contributions by about $20 million annually, a move that would help make up for roughly $4.3 billion in value the fund has lost since Sept. 30, 2007.