Fees, registration in bill

The House of Representatives approved 223-202 a financial services reform bill on Dec. 11 that would charge money managers user fees to help cover the costs of their inspections and would require large hedge fund and private equity managers to register with the SEC.

Lawmakers removed a provision that would have subjected about 4,000 money managers associated with broker-dealers to FINRA regulation.

The bill also would shift 4,200 of the about 11,000 SEC-registered money managers — those with less than $100 million under management — to state regulation.

The focus now shifts to the Senate, which is working on its own version of a financial services bill.

Deletion of the FINRA provision was a victory for money managers, said David Tittsworth, executive director of the Investment Adviser Association. “But the jury is still out on what the Senate will do.”

CalPERS' and CalSTRS' long-term municipal credit enhancement program ratings were downgraded to Aa3 from Aaa by Moody's Investor Service.

Municipalities buy credit enhancements from the two plans to boost the ratings on their bonds.

In a news release, Moody's attributed the downgrade to steep investment losses incurred by the funds, which it said could ultimately affect their ability to meet obligations to pay retirees' benefits.

CalPERS spokesman Brad Pacheco said the downgrade should have no effect on the credit enhancement program. CalSTRS spokesman Ricardo Duran could not be reached by press time.

Assets in U.S. corporate defined benefit and defined contribution plans totaled $5.3 trillion as of Sept. 30, up 11% from three months earlier, according to the Federal Reserve's Flow of Funds report.

Corporate DB plans had a total of about $2.1 trillion as of Sept. 30, up 8.1% from the previous quarter. Total assets in corporate DC plans were $3.2 trillion, up 13%, the report said.

Total assets in state and local government retirement funds as of Sept. 30 were $2.6 trillion, up 9.5% from June 30, while assets in the federal government's retirement funds totaled $1.2 trillion, up 3%.

The $23.7 billion Pennsylvania State Employees' Retirement System will gradually increase its target fixed-income allocation over as long as five years to 32.5% from the current 15% as part of the system's strategic investment plan.

The change will trim equity targets to 35.5% from 47%; alternative investments (private equity and venture capital), to 12% from 14%; real estate, to 7% from 8%; and inflation protection (including commodities) to 4% from 7%. The long-term absolute-return target remains unchanged at 9%.

System officials are making the move to meet the liquidity needs arising from a projected increase in benefit payouts.

Lehman Brothers Holdings as early as Dec. 14 is expected to close on a deal to sell two real estate mezzanine funds with a combined $2 billion in assets to real estate investment firm PCCP, confirmed Lehman spokeswoman Kimberly N. Macleod.

PCCP is taking over the general partnership interests in Lehman Brothers Real Estate Mezzanine Partners I and II, said William R. Lindsay, founding partner. PCCP is hiring 10 Lehman investmentportfolio managers that have been running the fund.

F. William McNabb III, Vanguard's president and CEO, will succeed John J. Brennan as chairman, effective Jan. 1. Mr. McNabb will retain the president and CEO posts.

The $30.9 billion Illinois Teachers' Retirement System hired PIMCO to run about $400 million in global macro, part of the fund's real-return allocation.

PIMCO had managed $99 million in a commodities portfolio within the system's real-return asset class; those assets will be moved to the global macro portfolio, Scottie Bevill, senior investment officer-fixed income, told trustees on Dec. 10.

The system also hired LM Capital Group to manage $25 million in global core-plus fixed income. Funding will come from TRS' ongoing $500 million emerging manager investment program.

Callan Associates was rehired as the fund's real estate consultant.

Global unleveraged real estate returns are expected to be 9% by 2011, with commercial real estate in the U.K. and most of Asia excluding Japan poised to recover first, according to an ING Real Estate Investment Management report.

U.S. commercial real estate recovery is expected to lag, bogged down by debt, the report said. ING estimates about 46% — or $1.4 trillion — of all U.S. commercial real estate debt will mature by 2012.

Fonds de Reserve pour les Retraites hired six managers to run a total of €1 billion in active euro-denominated credit, according to a news release.

The €28.8 billion ($42 billion) fund's investment-grade credit portfolio will be run by AXA Investment Managers, BNP Paribas Asset Management, Halbis Capital Management, La Banque Postale Asset Management, Quoniam Asset Management and Standard Life Investments.

Information on how much each manager will run was not available. Funding will likely come from reducing equities. An FRR spokeswoman could not reached for further information.

Richard C. Ferlauto, director of corporate governance and public pension programs at the American Federation of State, County and Municipal Employees, will leave that post Dec. 31 to become deputy director of policy in the SEC's Office of Investor Education and Advocacy, Mr. Ferlauto said.

It is a new position, said John D. Heine, SEC spokesman.

The $126 billion New York State Common Retirement Fund will receive $20 million from David Leuschen, co-founder and senior managing director of private equity firm Riverstone Holdings, in restitution to resolve his role in a pay-to-play investigation.

Andrew M. Cuomo, New York state attorney general, announced the payment. His office investigated the New York pension fund's investments in three joint ventures between Riverstone and Carlyle Group. Riverstone Holdings in June agreed to pay $30 million in restitution, and Carlyle Group agreed to pay $20 million in May, according to the statement.

A Riverstone comment about the new settlement included in Mr. Cuomo's statement said, “Riverstone and its founders are pleased to have resolved all issues with the New York attorney general with respect to its investigation of fundraising activities at the New York Common Retirement Fund.”

New York pension fund officials couldn't be reached.

U.S. educational endowments returned an aggregate -19% net of fees for the year ended June 30, according to preliminary results of a study by the Commonfund Institute and the National Association of College and University Business Officers.