California Gov. Arnold Schwarzenegger has privately proposed that CalPERS credit the state with $2 billion this year to help reduce the state's $19 billion budget deficit, a state official who requested anonymity told Bloomberg.
Mr. Schwarzenegger wants the $211.4 billion pension fund to count the credit as an advance on the roughly $74 billion he estimates in savings over the next 30 years from his proposal to roll back pension benefits for state workers.
The state must pay $3.9 billion this fiscal year to CalPERS to finance retiree costs, up from $145 million a decade earlier.
CalPERS spokeswoman Pat Macht declined to comment. Rachel Arrezola, a spokeswoman for Mr. Schwarzenegger, declined to comment.
County chooses 2 for fixed
The $7.2 billion San Diego County Employees Retirement Association hired fixed-income managers Hotchkis and Wiley and Hoisington to run $200 million each.
Hotchkis and Wiley will be managing high-yield bonds, the firm's first client in the strategy since high-yield portfolio managers Ray Kennedy and Mark Hudoff joined the firm from PIMCO last year, said Bob Dochterman, chief marketing officer at Hotchkis and Wiley.
Hoisington will be managing a core duration match account.
Lisa Needle, assistant chief investment officer at the pension fund, could not be reached by press time.
FASB: Don't include loans
Corporate 401(k) and other defined contribution plans would no longer include participant loans as part of investments under a proposal unveiled Aug. 18 by the Financial Accounting Standards Board.
“These aren't investments a plan can sell to another plan or another investor,” said Michael Gonzales, FASB associate practice fellow on the board's accounting revision project.
“Participants are borrowing from their own account,” Mr. Gonzales said.
The loans would continue to be included in total plan assets.
The FASB is accepting comments on the proposal through Sept. 7.
Fund to trim assumption
The $132.6 billion New York State Common Retirement Fund will reduce the assumed rate of return on its investments to less than the 8% rate it has used for 10 years, Bloomberg reported.
A reduction to 7.5% or 7.75% is likely, said Robert Whalen, a spokesman for Comptroller Thomas DiNapoli, the pension fund's sole trustee. The move “will increase the required contributions from the state and local governments but will keep the fund as strong as it is now,” Mr. Whalen said.
The fund had assets equal to about 107% of its future liabilities, according to its most recent annual report, for the year ended March 31, 2008.
Molins hires for overlay
The £300 million ($468 million) Molins PLC UK Pension Fund hired AEGON Asset Management to run a global tactical asset allocation overlay, according to AEGON spokesman Adrian Cammidge.
It is a new strategy for the fund, which performed a private search through investment consultant Hymans Robertson, Mr. Cammidge said.
Sally Soper, pension manager and secretary for the Molins fund, was out of the office and unable to be reached for comment. Questions were referred to Hymans Robertson, where a spokeswoman declined to comment.
Cuts not enough, study says
Taxpayers must cover at least one-third of $3 trillion needed to fund public employee pension plans, according to an academic study.
“Even if states uniformly eliminated generous early retirement deals and raised the retirement age to 74, the unfunded liability for promises already made would still be more than $1 trillion,” Joshua D. Rauh, associate professor of finance at Northwestern University's Kellogg School of Management, said in a statement.
He presented the paper Aug. 19 to the National Bureau of Economic Research's State and Local Pensions conference in Jackson Hole, Wyo., according to Bloomberg.
The study of 116 U.S. retirement plans for teachers and government workers showed that as of June 30, 2009, they had $1.89 trillion in assets to cover $3.15 trillion in liabilities, Mr. Rauh said. That's a gap of $1.26 trillion — more than double the shortfall of a year earlier, according to a study by the Pew Center on the States.
Fidelity: Balances drop
The average 401(k) account balance at Fidelity Investments fell 7.6% in the second quarter, but still was 15% higher than on June 30, 2009.
The account-balance drop “was due to the decline in the market,” said Beth McHugh, vice president of market insights, in an interview. The average account balance was $61,800 on June 30 compared with an average of $66,900 on March 31 she said. The average balance as of June 30, 2009, was $53,900.
The average deferral rate was 8.2% for the quarter ended June 30, a rate that has been steady for several quarters, Ms. McHugh said.
Eleven percent of total active participants took out loans from 401(k) plans in the year ended June 30, up from 9% for the 12 months ended June 30, 2009.
Borough bags custodian
London Borough of Wandsworth Pension Fund hired Northern Trust as global custodian, according to European procurement website Tenders Electronic Daily.
J.P. Morgan Worldwide Securities Services and State Street Bank were the £650 million ($1 billion) plan's previous global custodians. A search began in April 2009.
Pension fund manager Peter Harris could not be reached for comment.
Interim officer at CalSTRS
Investment officer Debra Smith was named acting director of investment operations at CalSTRS, Chief Investment Officer Christopher J. Ailman said.
Ms. Smith replaces John Petzold, who was named to the new position of director of investment management and deputy CIO of the $129.7 billion pension fund.
In a telephone interview, Mr. Ailman said there are two internal candidates to replace Mr. Petzold on a permanent basis, and CalSTRS also will be advertising for outside candidates as required by California law. Mr. Ailman would not name the internal candidates.
Mr. Ailman said the search to fill the position will take several months.
Papers, unions end fight
Philadelphia Newspapers agreed to pay union pension funds as much as $1.5 million to clear the last major hurdle to the publisher's plan to exit Chapter 11 bankruptcy protection under the ownership of its lenders, according to Bloomberg.
The seven pension funds, operated by unions including the Teamsters and the Newspaper Guild, agreed to drop an appeal of the company's reorganization plan in exchange for the right to pursue $1.5 million in claims, according to papers filed in U.S. Bankruptcy Court in Philadelphia.
Under the reorganization plan, a group of lenders including hedge fund Angelo Gordon and a unit of Credit Suisse had until Aug. 31 to complete the purchase of the company and take control of the Philadelphia Inquirer and Daily News.
The lenders have said they don't plan to continue contributing to the seven plans, with a combined $13 million in assets, once they gain control of the company.
PBGC takes over publisher's plan
The PBGC assumed responsibility for the pension plan of newspaper publishing company News-Journal Corp., Daytona Beach, Fla., confirmed PBGC spokesman Marc Hopkins.
The company's assets were sold in receivership to Halifax Media Acquisitions on March 23. The buyer did not assume responsibility for the pension plan, which is 65% funded, with assets of $28.2 million and liabilities of $43.66 million. The PBGC plans to cover $15.39 million of the shortfall.
News-Journal publishes the Daytona Beach News-Journal and six shopping guides in the Daytona Beach area.