S. Carolina tables firm
The South Carolina Retirement System Investment Commission voted 3-2 to table a proposal to create an external firm to manage the $24 billion system's illiquid assets, said Allen R. Gillespie, commission chairman.
“It basically means we're not proceeding with Devco,” said Mr. Gillespie, referring to the working name of the proposed firm. “It was too hard to sell within the time frame of the business opportunity.”
“Looks like the concept is on permanent hold,” confirmed Scott Malyerck, deputy state treasurer.
GM projects contributions
General Motors projects making contributions to its U.S. pension plans that combined could range from $5.1 billion to $14.7 billion from 2012 through 2015, according to a filing with the SEC.
The amount of the contributions depends on variations in projected investment return and discount rate for its $85.9 billion U.S. pension fund and discount rate. For its U.S. pension plan, GM uses an assumed expected long-term investment return of 8.5% and a 5.52% discount rate.
GM could contribute $500 million in 2012, $100 million in 2012, $3.9 billion in 2014 and $5.4 billion in 2015, if its U.S. pension assets annual investment return is 8.4%. But if the return falls to 7.4%, contributions would rise to $800 million in 2012, $200 million in 2013, $4.1 billion in 2014 and $5.7 billion in 2015, according a Nov. 18 filing.
If the discount rate falls 50 basis points, the contributions for those four years would increase to a combined $14.7 billion. If the discount rate rises 50 basis points, the combined contributions would fall to $5.1 billion.
The filing didn't project contributions for 2011.
General Dynamic settles
General Dynamics received final court approval for a $15.5 million settlement of a class-action lawsuit alleging the company violated its fiduciary duties by allowing Fiduciary Asset Management to charge excessive fees to participants in two company 401(k) plans, confirmed GD spokesman Rob Doolittle.
In a news release, General Dynamics and Fiduciary Asset Management officials said they complied with their ERISA obligations in running the two plans, which have combined assets of about $6 billion.
“However, the parties have determined that it is in their best interest, and General Dynamics has determined that it is also in the best interest of General Dynamics' employees, 401(k) plan participants and shareholders, to resolve the lawsuit by settlement,” the release said.
In an interview, Jerome Schlichter, founding partner of Schlichter, Bogard & Denton, the law firm that filed the suit, said that under the terms of the settlement, “General Dynamics will take steps to maximize participants' returns, including using an outside consultant, using an independent fiduciary, providing enhanced fee disclosures, continuing to pay record keeping on a per-participant — not asset — basis, and providing plan discounts from investment managers who also provide services to General Dynamics' defined benefit plans.”
AbitibiBowater to keep plans
AbitibiBowater agreed to maintain its four U.S. defined benefit pension plans as the company emerges from Chapter 11 bankruptcy proceedings, confirmed Marc Hopkins, a spokesman for the PBGC.
The four U.S. plans have combined assets of $508 million, Mr. Hopkins said.
In a news release Nov. 23, Joshua Gotbaum, director of the PBGC, said the agreement will keep $380 million of underfunding off the PBGC's books.
“Our legal and financial team has worked step by step with the company to make this outcome possible,” Mr. Gotbaum said in the news release.
The pulp and paper manufacturing company sought Chapter 11 protection in U.S. Bankruptcy Court in Delaware on April 16, 2009. The court approved the company's reorganization plan on Nov. 22, according to a company news release.
Elaine Washington, director of pensions and investments for the company, declined to comment.
Pennsylvania reform OK'd
Pennsylvania Gov. Ed Rendell on Nov. 24 signed a pension overhaul bill that aims to bring the $24 billion Pennsylvania State Employees' Retirement System and the $43.2 billion Pennsylvania Public School Employees' Retirement System to fully funded status.
The new law maintains the five-year asset smoothing for the employee system but extends the period for the school system to 10 years from five. The new amortization schedule for full funding is 30 years for employee system and 24 years for the school system. The school employee system now is 79.2% funded and the state employees system, 84.4%.
The bill caps the employer contribution rate increases to 3% in fiscal years 2010 and 2011, 3.5% in fiscal years 2012 and 2013, and 4.5% in fiscal years 2013 and 2014.
The retirement age for state employees was raised to 65 from 62. School employees' retirement ages were increased five years, to between 55 and 65, from between 50 and 60.
Also, employees of both systems will be required to work 10 years before vesting, instead of the current five years.
The law also establishes a variable contribution rate for employees of both systems, which increases half a percentage point per year.
Merseyside boosts alts
Merseyside Pension Fund approved a new strategic asset allocation for the £4.6 billion ($7.3 billion) fund, bumping up alternatives and international equity at the expense of U.K. equity.
The new strategic allocation reflects the current tactical allocation, so searches for new managers are not anticipated, according to a spokesman who asked not to be named.
The allocation to alternatives rose four percentage points to 14% of total assets, while international equity rose one point to 30%. U.K. equity dropped five points to 25%.
Mercer advised on the changes.
Five finalists for TRS post
The $94.9 billion Teacher Retirement System of Texas has picked five finalists for executive director, confirmed Howard Goldman, spokesman.
The finalists are Meredith Williams, executive director of the $36 billion Colorado Public Employees' Retirement Association; Brian Patrick White, CEO for the $7.2 billion San Diego County Employees Retirement Association; Bradley D. Belt, former executive director and CEO of the PBGC and now chairman and CEO for Palisades Capital Advisors; Mark P. Haas, chief deputy Michigan state treasurer and CFO of the Michigan Department of Treasury; and E. Ashley Smith, executive vice president and chief legal officer for Stewart Information Services, according to an e-mail from Mr. Goldman.
Despite the list of candidates, Mr. Goldman said, the search remains active and open to interested applicants.
Ronnie Jung is stepping down as executive director in July 2011 but will remain with the system. Korn-Ferry is assisting.
Paper tackles SWF investing
Sovereign wealth funds should split their investments into returns-seeking and hedging portfolios tailored to each fund's characteristics, according to a new paper by EDHEC.
The paper, funded by Deutsche Bank, suggests SWFs create hedging portfolios tailored to their income from — and payouts to — their state sponsors. The approach “can in fact be seen as the extension to sovereign wealth funds of the liability-driven investing paradigm recently developed in the pension fund industry,” according to the paper, “Asset-Liability Management Decisions for Sovereign Wealth Funds.”