U.S. corporate defined benefit and defined contribution plans had combined assets of $5.323 trillion as of June 30, down 6.8% from three months earlier, according to the Federal Reserve's Flow of Funds report issued Sept. 17.
Corporate DB plan assets totaled $2.052 trillion as of June 30, down 5.4% from the previous quarter. Total assets in corporate DC plans were $3.271 trillion, down 7.5%.
The value of equities in corporate DB plans was $702.3 billion as of June 30, down 14.3%, while the value of bonds was $353.8 billion, up 3%.
In corporate DC plans, the value of equities was $971.6 billion, down 12%, while the value of bonds was $108.2 billion, down 1%.
Corporate DB plans saw outflows of $24.7 billion for the quarter while corporate DC plans saw inflows of $52.3 billion.
Total assets in state and local government retirement funds as of June 30 were $2.557 trillion, down 8.2%, while the federal government's retirement funds totaled $1.311 trillion, down 1%.
$1 million settlement
William “Bill” White, an unlicensed placement agent, agreed to pay a $1 million settlement to New York for his role in the so-called pay-to-play scandal involving the $124.8 billion New York State Common Retirement Fund.
In addition, Mr. White will cooperate with state Attorney General Andrew M. Cuomo's ongoing investigation and abide by a code of conduct that prohibits placement agents from doing business with New York pension funds, according to a news release from Mr. Cuomo.
Mr. White was a fundraiser for Alan G. Hevesi, former New York state comptroller who resigned in December 2006.
MOSERS increases rate
The $7 billion Missouri State Employees' Retirement System will increase its employer contribution rate to 13.97% of state payroll effective July 1, 2011.
The state's current contribution rate is 13.81%.
CalPERS loan idea dropped
California Gov. Arnold Schwarzenegger backed off a proposal to borrow $2 billion from CalPERS to help balance a state budget now almost three months overdue, according to Bloomberg.
“Any idea to borrow money from the CalPERS pension fund is off the table,” Mr. Schwarzenegger said in a statement Sept. 16. “The Legislature must pass a budget that lets us live within our means, and includes the necessary reforms to fix our broken budget process and rein in out-of-control pension costs.”
Anne Stausboll, CEO of the $205.5 billion California Public Employees' Retirement System said this week there had been informal discussions with Mr. Schwarzenegger's department of finance on crediting the state with $2 billion this year, an idea floated by the administration to help balance the budget.
The $2 billion would have been an advance on the roughly $74 billion Mr. Schwarzenegger estimates the state would save during the next 30 years from his proposals to roll back pension benefits for government workers.
More advice, target date
About 60% of employers with defined contribution plans provided participant access to financial advice last year, compared with 51.8% in 2008 and 47.2% in 2005, according to the latest annual survey by the Profit Sharing/401k Council of America.
“This is a big jump in advice,” David Wray, PSCA president, said. “Employers want their employees to be successful. Employees who get advice save more and have better asset allocations.”
Target-date funds have soared in popularity, with 62.3% of respondents offering this option in 2009 vs. 24.9% in 2005, according to the survey.
Automatic enrollment leveled off after experiencing significant gains in recent years; 38.4% offered auto enrollment last year, compared with 39.6% in 2008. However, in 2005, only 16.9% offered auto enrollment.
Citadel mulls fee cuts
Citadel is considering cutting fees on its two main funds, two people with knowledge of the firm's plans told Bloomberg.
The Kensington and Wellington hedge funds at Citadel, the $11.1 billion firm founded by Ken Griffin, are among a handful that pass along all expenses to clients rather than charging the industry-standard 2% annual management fee. Expenses at the firm have reached as much as 8% of assets, and typically range from 4% to 6%.
Citadel lost 55% of assets as markets tumbled in 2008, and when investors sought to take out $1.2 billion, the firm suspended redemptions before restoring them in late 2009. Even after last year's 62% return and this year's 4% gain, the funds would still need to climb about 30% to make clients whole. Assets fell from $13.5 billion a year ago as money was returned to customers.
Spokeswoman Devon Spurgeon declined to comment on the possible changes.
Foundation taps exec
Brett Johnson was named associate director for public investments at the $6.9 billion William and Flora Hewlett Foundation.
Spokesman Jack Fischer did not return a call seeking information about Mr. Johnson's predecessor. Mr. Johnson was the CIO and a mutual fund portfolio manager for real estate and fixed income manager Grubb & Ellis AGA. Damon Elder, a Grubb & Ellis AGA spokesman, did not return a call seeking information about Mr. Johnson's replacement.
Suit dismissal sought
Morgan Stanley Chairman John Mack and CEO James Gorman sought to defeat a shareholder lawsuit filed by two pension funds over allegedly “unconscionable” compensation the company paid to employees.
A lawyer for Messrs. Mack and Gorman and other Morgan Stanley executives named in the lawsuit asked New York State Supreme Court Justice Shirley Werner Kornreich to dismiss the complaint at a court hearing Sept. 16 in Manhattan. Morgan Stanley directors also sought to throw out the lawsuit.
“In times of crisis, you want the most talented people to stay. You pay them to stay,” said Evan Chesler, who represents Messrs. Mack and Gorman and the executives.
A group of Morgan Stanley shareholders sued Morgan Stanley executives and directors earlier this year over $45 billion in employee compensation in 2006, 2007 and 2009.
Among the shareholders that filed the lawsuit are the $814.5 million Central Laborers' Pension Fund, Jacksonville, Ill., and the $5.8 million Security Police and Fire Professionals of America Retirement Fund, Roseville, Mich.
Average cap rates fall
Overall real estate capitalization rates continued to decline as investors remain focused on a few proven real estate markets and core assets, according to the PricewaterhouseCoopers Korpacz Real Estate Investor Survey released Sept 16.
Average overall cap rates declined in 26 of the 31 markets surveyed over the three months ended July 31.
Aggregate average overall capitalization rate of commercial real estate in the three months ended July 31 was 8.15%, down from 8.33% in the prior three-month period.
The capitalization rate is the ratio between a property's net operating income and the original price.