News briefs: MassPRIM pulls $1.1B from BlackRock

Massachusetts Pension Reserves Investment Management board, Boston, terminated BlackRock from a nearly $1.1 billion active core domestic fixed-income portfolio.

Staff of the $46.8 billion fund at the Dec. 7 board meeting cited turnover over a period of years in the firm's fixed-income division — when acquisitions more than doubled BlackRock's assets under management and product lineup — as well as weak performance as factors that led to a loss of confidence in the money manager's continued focus on fixed income.

The board voted to temporarily move the $1.056 billion to a Barclays Capital Aggregate Bond index account, also managed by BlackRock, until PRIM's annual asset allocation review in the first two months of 2011. That infusion will bring that index account to $2.346 billion.

Ken Anadu, PRIM investment analyst, public markets, told the board PRIM's concerns about turnover apply only to the firm's core fixed-income product. PRIM continues to have confidence in other BlackRock products such as the firm's passive, or model-based, fixed-income offerings.

“MassPRIM is a valued client and we're pleased they chose BlackRock's passive core bond strategy while evaluating alternatives to the active core bond account,” BlackRock spokesman Brian Beades said in an e-mailed statement.

As of Oct. 31, BlackRock was managing roughly 8% of MassPRIM's overall assets, with $1.29 billion in passive core fixed income; $1.056 billion in the terminated active core fixed-income strategy; $689 million in active global inflation-linked bonds and $563 million in passively managed TIPS.

U.S. Supreme Court justices, hearing arguments in a case involving Janus Capital Group, signaled they are divided about restricting securities fraud suits by shareholders of mutual fund companies, according to Bloomberg.

The court on Dec. 7 reviewed a ruling that let shareholders sue Janus and a subsidiary for helping produce allegedly misleading prospectuses for Janus mutual funds. Janus contends the funds are separate legal entities and that neither the parent company nor the subsidiary was responsible for the prospectuses.

The case is a follow-up to a 2008 Supreme Court decision that curbed securities suits against a company's banks and business partners. That decision divided the court along ideological lines, and the hour-long argument in Washington suggested the likelihood of a similar split, possibly leaving Justice Anthony Kennedy as the deciding vote.

Mr. Kennedy hinted that he is uncomfortable with the prospect of absolving parent companies when they exercise total control over a unit that misleads the public. He asked whether a mutual fund company could be sued if it “did 100% of the prospectus work.”

At the same time, Mr. Kennedy suggested that shareholders must show that misleading statements were openly attributed to the parent — something he said the Janus investors hadn't done.

The mutual fund fight stems from allegations that Janus allowed preferred clients to engage in market timing.

The prospectuses said the funds had taken steps to deter market timing. In the lawsuit, Janus shareholders say those assurances were revealed to be false in 2003 when New York state officials filed a complaint against the company, causing its share price to fall. Denver-based Janus later agreed to pay $201 million and cut fees by $125 million to settle claims by state and federal regulators.

The shareholders are seeking to sue both Janus Capital Group and Janus Capital Management, which serves as the investment adviser to the funds and has day-to-day responsibility for their management. The Obama administration is backing the shareholders at the Supreme Court, arguing the suit should be allowed to go forward.

Judy Schub, managing director of the Committee on Investment of Employee Benefit Assets, died Dec. 3, Elizabeth Johns, a spokeswoman for the Association for Financial Professionals, an affiliate of CIEBA, wrote in an e-mailed response to questions.

Ms. Schub was 62.

Funeral services for Ms. Schub were held Dec. 7. Ms. Johns did not respond to requests for details on Ms. Schub's death.

Ms. Schub was named managing director for CIEBA in June 2001. Prior to that, she was assistant executive director for legislative affairs for the Pension Benefit Guaranty Corp.

Memorial contributions may be made in her name to the Women's Institute for a Secure Retirement or Binghamton University Foundation, according to an obituary published on the Washington Post's website.