News briefs: April 4, 2011

Oklahoma Teachers' Retirement System, Oklahoma City, could search for international equity managers if two existing managers in the asset class — Capital Guardian and Brandes Investment Partners — do not improve their performance, James Wilbanks, executive director of the $10 billion system said in a telephone interview.

The system put CapGuardian and Brandes “on notice” at its March 23 board meeting. Capital Guardian runs $395 million and Brandes, $484 million, Mr. Wilbanks said.

The system has approximately $1.5 billion in international equities.

Mr. Wilbanks said the system could issue an RFP if performance is not improved.

Chuck Freadhoff, a spokesman for Capital Guardian, said officials “don't discuss our clients or their decisions.” A spokesman for Brandes could not be reached for comment.

Mr. Wilbanks said the board also is considering hiring a dedicated emerging markets manager. He said the system's four international equity managers are allowed to invest up to 30% of the pension fund's allocation in emerging markets, but not all of them are at the ceiling.

“We're not definitely going that way (toward a dedicated emerging markets manager) but we're talking about it in more detail,” he said.

He also said there is a “value tilt” to the system's current lineup of international equities investments, so the system is considering hiring a dedicated small-cap or midcap manager.

At the board meeting, the system also renewed its five-year contract with J.P. Morgan Chase, its custodial bank and securities lending agent.

Illinois State Board of Investment, Chicago, terminated Buford Dickson Harper & Sparrow, which managed $24 million in active domestic large-cap growth equities, for performance reasons, said William R. Atwood, executive director.

The $10.7 billion ISBI reallocated the proceeds to a Russell 1000 large-cap growth index fund managed by RhumbLine Advisers, raising the portfolio to $424 million.

William H. Young, president and chief operating officer of Buford Dickson, couldn't be reached for comment.

Annual 10-K filings from three companies show more pension contributions are in store.

Sears Holdings Corp., Hoffman Estates, Ill., expects to contribute $343 million to its U.S. defined benefit plan and US$9 million to its Canadian defined benefit plan in 2011, according to its 2010 10-K filing.

In 2010, the company contributed $277 million to its U.S. plan and $2 million to its Canadian plan, the filing showed.

The company's U.S. pension assets increased 11.6% in 2010 to $4.1 billion as of Jan. 29, the end of the company's fiscal year. The funded status of its U.S. DB plan was 72.1% at year-end 2010 vs. 66.8% a year earlier. The discount rate fell to 5.75% from 6% in the same period.

Separately, the Goodyear Tire & Rubber Co., Akron, Ohio, expects to contribute about $200 million to $225 million to its worldwide defined benefit pension plans in 2011, and an additional $400 million to $450 million in 2012.

According to the company's 10-K, its U.S. pension assets increased 8.9% in 2010 to $3.7 billion as of Dec. 31. The funded status of its U.S. defined benefit plans was 65.8% at year-end 2010 vs. 63.9% a year earlier. The discount rate fell to 5.2% from 5.75% in the same period.

And Tiffany & Co. expects to contribute $25 million to its worldwide pension plans in 2011, according to its 10-K.

The New York-based company contributed $41 million to its three defined benefit plans, two for U.S. employees and one for Japan, in 2010.

The company's worldwide pension assets increased 30.4% in the most recent fiscal year, to $263 million as of Jan. 31.

Texas County & District Retirement System, Austin, increased its target allocation to alternatives as part of a new asset mix for the $18 billion system, confirmed Paul J. Williams, investment officer.

The absolute-return (hedge fund) target increased to 20% from 15% while the private equity target rose to 10% from 8%, according to an investment activity report on the system's website. The emerging markets equity target increased slightly to 6% from 5%.

Target allocations were reduced for developed international equity, to 15% from 16%; core fixed income, to 10% from 15%; and TIPS, to 3% from 5%. Allocations were unchanged for domestic equity, 16%; high-yield debt, 13%; REITs, 3%; and private real estate and commodities, 2% each.