Oklahoma Teachers' Retirement System, Oklahoma City, terminated PIMCO because of “complexity and opacity” in a $550 million core fixed-income portfolio the firm managed for the $8.6 billion fund, said James Wilbanks, executive secretary.
“It's a highly complex portfolio strategy that uses a lot of derivatives and we were just not comfortable with that,” Mr. Wilbanks said in an interview.
The system also has $110 million invested in two PIMCO distressed mortgage partnership funds, which Mr. Wilbanks said have similar opacity and complexity issues. He said the system plans to liquidate those two investments at the end of a five-year commitment; the fund is in the second year of that term.
Mr. Wilbanks said the issues surfaced during a recent audit by the system's internal auditor.
In a fund news release, Mr. Wilbanks said that PIMCO has been a “great” manager for the system, and the move is a “result of our interest in constructing a less complex fixed-income portfolio.”
Mr. Wilbanks said the PIMCO assets will be divided among the fund's five existing fixed-income managers — Loomis Sayles., Lord Abbett and MacKay Shields, all core-plus, and Stephens and Hoisington, both interest rate-sensitive managers. It has not been determined how much each manager will receive.
PIMCO spokesman Mark Porterfield said the firm does not comment on client-related matters.
BorgWarner revs up plan with $111 million contribution
BorgWarner Inc., Auburn Hills, Mich., agreed to make $111 million in contributions to its pension plan to cover benefits for 3,000 employees who lost their jobs when the company shut down a Muncie, Ind., plant last April, said Marc Hopkins, a PBGC spokesman.
The agreement with PBGC is intended to ensure that the plan is in better financial shape, Mr. Hopkins said.
Under ERISA, the Pension Benefit Guaranty Corp. is required to seek additional protection when more than 20% of a company's employees covered by a pension plan lose their jobs because of a plant closing.
Erika Nielsen, a BorgWarner spokeswoman, said: “We're just bringing the plan back to the funding levels BorgWarner maintained just before the economic downturn. BorgWarner values the contributions of our nearly 3,000 workers covered by the plan and we're proud to offer this benefit.”
Ms. Nielsen said BorgWarner had $269.1 million in total U.S. defined benefit assets as of Dec. 31.
New legislation could add to PBGC's multiemployer liability
Legislation that would require the PBGC to subsidize the pension benefits of participants of companies that drop out of multiemployer pension plans was announced March 22 by Sen. Bob Casey, D-Pa.
Under a bill that Mr. Casey plans to introduce on March 23, assets equal to up to five years of the projected benefit payments for orphaned multiemployer plan participants would be put into a separate account by the surviving companies in the plan, and the participants would be paid full plan benefits out of that account for five years. After those five years, the bill would require the Pension Benefit Guaranty Corp. to kick in whatever funding is required to pay the full benefits that the orphaned participants would have received from the multiemployer plan.
Another provision in the bill would raise the maximum amount the PBGC can pay to any plan participant to $21,000 a year from $12,800 a year under current law. The bill, the Create Jobs & Save Benefits Act of 2010, also would clear the way for separate multiemployer plans to combine for the purpose of reducing administrative costs, Mr. Casey said in a teleconference with reporters.
Mr. Casey said the bill could cost up to $8 billion to $10 billion.
PBGC officials had no comment, according to Jeffrey Speicher, an agency spokesman.
General Mills shareholders to get limited say on pay
General Mills Inc. will allow shareholders a non-binding vote on executive compensation every other year, starting at its annual meeting scheduled for September, according to a company statement.
At the company's annual meeting Sept. 21, 2009, shareholders voted 51% in favor of a non-binding shareholder proposal calling for an annual say on pay. Walden Asset Management sponsored the proposal, said Kirstie Foster, General Mills spokeswoman.
She said a say-on-pay vote every two years would provide investors “the input they desire” and give company executives enough time to “engage” investors and discuss concerns.
“We want to be responsive to investors on the vote of the 2009 meeting” in favor of the proposal, Ms. Foster said in an interview. “We meet directly with stockholders throughout the year and we will continue to do so.”
Timothy Smith, Walden senior vice president, said the firm is pleased by the outcome and believes federal legislation will be adopted possibly this year to require all companies to have an annual say-on-pay vote.
Financial regulatory overhaul legislation introduced by Sen. Christopher Dodd, D-Conn., chairman of the Senate Committee on Banking, Housing and Urban Affairs, includes an annual say on pay.
Illinois boosts 2 real estate accounts, puts pressure on compensation
Illinois State Board of Investment, Chicago, increased by $100 million each allocations to existing separate account real-estate managers ING Clarion and CB Richard Ellis, but made CBRE's new funding contingent on a restructuring of compensation.
The new funding raises ISBI's commitment to each to $400 million.
The board of the $10.1 billion fund threatened to reassign to another manager CB Richard Ellis' new funding unless company executives change the compensation arrangement for Troy Jenkins, portfolio manager on the account, to more of a performance-based fee than an asset-based one.
Board members haven't decided how they would reallocate the $100 million if Mr. Jenkins' compensation arrangement doesn't change. The board could hire a new real estate manager, or give the money to ING Clarion, said William R. Atwood, executive director. The board expects to make a decision on CBRE in June.
Townsend Group, ISBI's real-estate consultant, recommended the change in compensation terms to better align the interests of both the firm and the fund. The board authorized Townsend to negotiate a new arrangement.
“Under the agreement we have, the main portion is an asset-based fee,” said Mr. Atwood, who added he isn't familiar with the specifics of the compensation arrangement at the firms.
Mr. Jenkins was out of the office and unavailable for comment. Pam Barnett, CBRE director of communications, didn't' respond to requests for comment.
Nevada plan cuts two manager for performance
Nevada Public Employees' Retirement System, Carson City, terminated Goldman Sachs Asset Management and Quantitative Management Associates for performance, confirmed Ken Lambert, chief investment officer of the $22.5 billion fund.
Mr. Lambert said GSAM ran $600 million and Quantitative, $500 million, in international equities.
Goldman Sachs had underperformed the retirement system's internal index by 1.2 percentage points over the past two and a half years and Quantitative underperformed by 4.1 percentage points for the same period. Both were hired in 2007, Mr. Lambert said.
He said the assets were placed in an index fund with Mellon Capital until fund officials decide whether to put the mandates out to bid.
Goldman Sachs spokeswoman Andrea Raphael declined comment. A spokesman for Quantitative Management could not be reached.
New Mexico puts SSgA, Artio on watch
The $10.9 billion New Mexico Public Employees Retirement Association, Santa Fe, placed SSgA and Artio Global Investors on watch for performance. SSgA manages $365 million in its International Alpha Select Strategy, and Artio handles $220 million in its International Equity II Fund.
Officials at SSgA and Artio could not immediately be reached for comment.
R.V. Kuhns is the association's consultant.
PBGC takes four plans of Indalex
The PBGC has taken over the four pension plans of Indalex Inc., Lincolnshire, Ill., confirmed Marc Hopkins, an agency spokesman.
The plans, which cover 3,100 former workers and retirees, faced abandonment after the company sold substantially all its assets in Chapter 11 bankruptcy proceedings last year and the buyer was unwilling to take responsibility for the plans, according to a news release from the Pension Benefit Guaranty Corp.
The plans were 57% funded with a combined $62.4 million in assets to cover $109.8 million in liabilities. The PBGC said it would cover $47.1 million of the $47.4 million shortfall, the news release said.
Indalex filed for Chapter 11 bankruptcy protection on March 20, 2009, according to Mr. Hopkins.
ADIA managing director dies in glider crash
Sheikh Ahmed bin Zayed Al Nahyan, managing director of the Abu Dhabi Investment Authority, died March 26 in a glider crash in Morocco, according to an announcement from WAM, the state news agency of the United Arab Emirates.
Mr. Ahmed, the 41-year-old brother of Abu Dhabi's president, Sheikh Khalifa bin Zayed Al Nahyan, oversaw the world's largest sovereign wealth fund with estimated assets of $627 billion, according to data from the Sovereign Wealth Fund Institute.
He had been reported missing after his glider crashed into a lake at the Saidi Mohammed bin Abdullah Dam, about 25 miles south of Rabat, Morocco. Authorities searched for four days before recovering his body.