Ohio School Employees Retirement System, Columbus, plans to increase its direct hedge fund investment program to 9% of assets from 6%, said Robert G. Cowman, the $9.5 billion plan's director of investments.
Mr. Cowman said he anticipates that most of the increase will go to the system's existing hedge fund managers by June 30, the end of its fiscal year, but he did not rule out the addition of more direct hedge funds.
The system has direct hedge fund investments with more than 30 managers, including Regiment Capital Management, King Street Capital, Bridgewater Associates and Viking Global Investments, according to the fund's latest annual report.
In March, system trustees increased the fund's hedge fund hard cap target to 15% with a 10% to 20% range, from 10% with a range of zero to 10%. Mr. Cowman said the latest investment plan is designed to bring the fund closer to the new target. Funding is coming from the fund's equity portfolio. Hedge fund consultant Aksia will assist.
Defunct meatpacker's plan taken over by PBGC
The PBGC took over the defined benefit pension plan of the defunct Dubuque Packing Co., Dubuque, Iowa, confirmed Gary Pastorius, a PBGC spokesman.
The plan faced abandonment after the company was liquidated in Chapter 7 bankruptcy proceedings, the Pension Benefit Guaranty Corp. said in a news release.
The pension plan, which was terminated on March 31, is 36% funded, with assets of about $1.9 million and liabilities of about $5.2 million, the news release said. The PBGC expects to cover the entire $3.3 million shortfall.
Judge tosses out part of Beazer 401(k) lawsuit
A U.S. District Court in Atlanta dismissed part of a lawsuit against Beazer Homes USA filed by employees in its 401(k) plan who claimed the company breached its fiduciary duty by offering failing company stock as an investment option.
The 401(k) plan had $63.7 million in assets as of Dec. 31, 2008, according to the 2009 Money Market Directory.
The class-action lawsuit claimed that between July 28, 2005, and Nov. 2, 2007, Beazer allowed its employees to invest part of their 401(k) assets in company stock, even as the stock was declining in value. The plan lost at least $46 million during the class period, according to the lawsuit.
U.S. District Court Judge Richard W. Story cited three similar court rulings in the Northern District of Georgia in ruling on April 2 that failure to diversify plans such as Beazer's 401(k) plan does not constitute a breach of fiduciary duty under ERISA.
Mr. Story did not dismiss lawsuit allegations that Beazer executives had an obligation to disclose information about the health of the company to its 401(k) plan and compensation committees.
“When a corporate insider puts on his ERISA hat, he is not assumed to have forgotten adverse information he may have acquired while acting in his corporate capacity,” Mr. Story wrote in the ruling, citing a similar case in 2003 involving WorldCom.
Mr. Story also allowed another portion of the lawsuit — that company officials failed to disclose information to plan fiduciaries about the risks associated with owning company stock — to continue.
He wrote that the court “does not find that securities laws shield defendants from their fiduciary duties under ERISA to plan participants.”
Delta Air Lines schedules $558 million contribution
Delta Air Lines, Atlanta, plans to contribute $558 million by the end of this month to its four defined benefit pension plans covering most U.S. employees — seven months ahead of schedule.
With this month's contribution, Delta will have put a total of $665 million into the plans this year.
“Putting this money into our pension plans earlier means it will start working for employees sooner, by earning returns that add to the plan assets,” Mike Campbell, Delta executive vice president of human resources, said in a news release.
Delta also has contributed $100 million to its defined contribution 401(k) plans so far this year and plans to contribute another $200 million by the end of 2010, according to the release.
A Delta Air Lines spokesman could not be reached for comment.
UAL-US Air combo would merge $6.52 billion in assets
A merger of UAL Corp. and US Airways Group Inc. would create a company with a combined $6.52 billion in retirement assets, mostly all in defined contribution plans with one major overlap in managers.
Reports surfaced April 8 that the two airlines were renewing discussions about a possible merger.
Retirement assets of UAL, parent of United Air Lines Inc., Chicago, consist of $5.4 billion in U.S. defined contribution plans and $156 million in non-U.S. defined benefit plans, according to filings with the SEC.
Retirement assets at Tempe, Ariz.-based US Airways total $960 million, according to Pensions & Investments' data. They include $438 million in defined contribution plans, according to SEC filings. Also, US Airways' retirement assets include $38 million in legacy defined benefit plans that were closed or frozen.
Both companies use Fidelity in their primary 401(k) plans. UAL also uses Vanguard, while US Airways also uses Capital Guardian and Artio.
A $2.4 billion UAL pilot defined contribution plan uses a more diverse mix of managers, including, among others, Russell Trust, PIMCO, WAMCO, Arrowstreet, and MFS.
Simha Sudarshan, UAL managing director-banking, insurance and investments, declined to comment about a potential merger of the companies and the impact of such a combination the company's retirement plans.
US Airways officials couldn't be reached for comment.
ERISA Advisory Council neutral on stable value as QDIA
ERISA Advisory Council is taking a pass on a proposal that the Labor Department approve the use of stable value funds as a qualified default investment alternative in employee-directed defined contribution plans.
The proposal to recommend use of stable value as a QDIA was included in a comprehensive review of the investment options considered by the council last year.
“On balance, after consideration of all the testimony and based on the professional experience of council members and what they believe to be in the best interests of achieving retirement security for American workers, the council has decided not to make any recommendation to the secretary (of Labor) with respect to reconsideration of its decision not to include stable value funds as a QDIA,” the council said in a report issued April 8.
The council recommended that the Labor Department provide guidance on stable value funds to both plan sponsors and plan participants. Testimony the council heard in two days of hearings earlier this year supports the DOL “directly or indirectly” encouraging disclosure of critical information to plan sponsors, such as administrative costs and fees, the council report said.
“This is an important factor in determining the efficiency and prudence of any plan investment,” the report said.
“There was ... a substantial consensus amongst witnesses that it would be helpful if the Department (of Labor) prepared some general informational material targeted to plan participants that highlights some of the basic material features of stable value funds,” the report also said.
GM considers $11.9 billion contribution from 2013-2015
General Motors Co., Detroit, might contribute a total of $11.9 billion to its U.S. pension plans from 2013 through 2015 but expects to contribute only $95 million this year, according to the company's 10-K report.
GM might contribute $2.5 billion in 2013, $4.6 billion in 2014 and $4.8 billion in 2015, the report said, and the company might need to make significant contributions beyond 2015, although the report did not indicate how much.
“There is no expected required funding for our U.S. hourly and salaried pension plans during 2010 through 2012,” the report said.
The U.S. plans had $84.5 billion in assets and $101.4 billion in liabilities as of Dec. 31.
GM contributed $31 million to its U.S. plans last year.
For its non-U.S. pension plans, GM expects to contribute $355 million this year, down from $4.2 billion contributed last year. GM's non-U.S. plans had $14 billion in assets and $24.3 billion in liabilities as of Dec. 31.
CalSTRS private equity investments tumble in 2009
CalSTRS private equity investments lost 9.4% for the 12 months ended Sept. 30, according to the $132.6 billion system's latest financial report.
The data, released at California State Teachers' Retirement System's board meeting in West Sacramento on April 8, indicated that losses had slowed as 2009 progressed: the system's private equity portfolio had dropped by 30.7% for the one-year period ended March 31, 2009.
The fund's real estate investments lost $500 million in the six months ended Sept. 30, the investment committee was told. The real estate portfolio totaled $12.4 billion as of Sept. 30.
Micolyn Yalonis, principal of the Townsend Group, the system's real estate consultant, said in a presentation to the committee that the losses were attributed to the portfolio's heavy weighting toward non-core investments.
“These investments have been extremely susceptible to this market decline, particularly due to the negative effect of leverage, and have significantly impacted the portfolio's performance,” she said.
The system's $8 billion in non-core real estate investments returned -49.1% for the year ended Sept. 30, 30 percentage points below the custom benchmark of -19.1%. The $4.4 billion core portfolio returned -34.8%.
The non-core portfolio showed a gain of 0.8% in the quarter ended Sept. 30, while the core portfolio returned -3.6%, Ms. Yalonis added.
Most employers, workers don't see reversal from economic crisis changes
Seventy-seven percent of employers with defined benefit pension plans and 52% of employers with defined contribution plans don't expect this year to reverse changes made to the plans in response to the economic downturn, according to a Buck Consultants survey.
The survey of nearly 200 companies shows that 22% made changes to their defined benefit plans in 2009. Sixty-eight percent of employers with salaried employee DB plans froze participants' benefits in 2009 and 32% closed their plans to new employees. Of hourly union employee DB plans, 46% froze benefits and 36% closed their plans to new employees.
Twenty-four percent of companies made changes to their defined contribution plans in 2009. Of those, 43% reduced or eliminated their employer match in 2009 and 24% of those with a non-elective/profit-sharing employer contribution eliminated or reduced the contribution.
More than 40% of DB plans reported losing more than 20% of the plan's value because of the economic downturn.
Tamara Shelton, principal and managing director of the retirement practice at Buck Consultants, said in a telephone interview that she had expected more DC plans would reverse their changes because of a general trend toward 401(k) plans as a retirement vehicle.
“My sense is that plan sponsors are starting to restore their match; some of them are starting to take action now,” she said. “They understand the need for providing some kind of retirement benefit.”
California moves closer to placement agent legislation
A California Assembly committee on April 7 approved a bill that would force placement agents to register as lobbyists with the state and ban them from collecting contingency fees from money managers.
The Assembly Committee on Public Employees, Retirement and Social Security — by a 4-to-1 vote — approved the bill, which now goes to the Assembly Elections Committee.
Placement agents oppose key parts of the bill, specifically provisions that would ban them from accepting compensation from their clients that is based on whether they were able to obtain them a contract.
Walter Hughes, a spokesman for Assemblyman Ed Hernandez, who sponsored the bill, said Mr. Hernandez believes that the contingency-fee ban is an important part of the legislation. “The Assembly believes the payment of contingency fees can inherently lead to corruption,” he said. The ban on contingency fees for lobbyists goes back 60 years, but lobbyists have still been able to make money and have many clients, he said.
Mr. Hughes did say that Mr. Hernandez would work with placement agent groups on the bill's wording, specifically regarding emerging and minority-owned money managers. Placement agents testified at the hearing that those money management firms would be most hurt by the legislation because they wouldn't be able to afford to hire a placement agent firm on a retainer basis.
Final approval of the legislation, which is supported by the $205.8 billion California Public Employees' Retirement System, Sacramento, is far from certain because it would require amending California political reform laws and would require a two-thirds majority of both the Assembly and the state Senate. Democrats, who generally support the bill, control both houses but don't have the required majority. Assembly Republican leaders oppose the bill because it's anti-business.