PHILADELPHIA -- The $3.4 billion Philadelphia Municipal Pension Fund is conducting an asset allocation study, and hopes to present recommendations to the board before the end of the year, said Marc Bonavitacola, alternative investments officer.
The study will examine the fund's allocation to domestic equities. It has been more than three years since the last one.
Trustees also are considering expanding the mandates of some international equity managers. Philadelphia has 15% of assets in international equities in developed markets; all managers have regional mandates.
The impact of the European monetary union, eliminating international fixed income (8% of total assets and changing weightings for alternative investments all are part of the study, Mr. Bonavitacola said. Finally, the pension fund will consider the viability of real estate as a separate asset class.
Mercer Investment Consulting is assisting.
Meanwhile, the city pension fund reported returns of 17.82% for the three years ended March 30, compared with a three-year target rate of return of 9.7%.
Vassar endowment looking at alternatives
POUGHKEEPSIE, N.Y. -- The $540 million Vassar College endowment is examining its alternative investment exposure, and is considering investing in an additional buyout fund, said Jay Yoder, director of investments.
Vassar has 10% of its total assets in hedges, such as event-driven and arbitrage; 7% in private equity and venture capital and 10% in inflation hedges, like oil and gas and real estate.
In a related matter, the endowment has committed $9 million to American Securities Partners II and $7.5 million to the Lafayette Fund, managed by Hunt Financial. Both are buyout funds targeting small and midsized deals.
Separately, the fund invested $4 million in The Directors Fund, run by Commodities Corp.
Funding will come from rebalancing. The searches were done in-house.
SEC asked to investigate bond pricing problems
WASHINGTON -- Rep. John D. Dingell, D-Mich., the ranking minority member of the House Commerce Committee, has asked the SEC to investigate the lack of bond pricing information that might result in investors getting less than the best price when they buy or sell bonds.
In a letter to SEC Chairman Arthur Levitt Jr., Mr. Dingell also asked the SEC to study if the current structure of the bond markets might create an anticompetitive atmosphere. He enclosed correspondence from Larry E. Fondren, president of the Integrated Bond Exchange, who has been attempting to create the nation's first bond exchange, and has charged that bond dealers are attempting to stifle competition.
Mr. Dingell also wrote a letter to Rep. Michael G. Oxley, R-Ohio, supporting his plans to hold a hearing Sept. 29 on bond market transparency.
Defined benefit plans to combine at 2 companies
Defined benefit plans are expected to be combined at companies that resulted from two different mergers.
Crestar Financial's $207 million pension fund eventually will be merged with SunTrust Bank's $609 million defined benefit pension fund, said Jim Armstrong, director of investor relations at SunTrust.
SunTrust, Atlanta, signed an agreement to buy Crestar, Richmond, Va., for $9.5 billion.
And two utilities that merged last year -- Public Service Co. of Colorado, Denver, and Southwestern Public Service, Amarillo, Texas -- will combine their defined benefit plans next quarter.
Jim Gerrity, pension analyst for the $780 million Colorado fund, said a decision on what managers will be retained, eliminated and hired will be made by December. Southwestern has $480 million in pension assets.
Chicago Park fund starts asset allocation study
CHICAGO -- The $640 million Chicago Park Employees' Annuity & Benefit Fund will start an asset allocation study in the next month or so, said Joseph Fratto, executive director.
The study follows the adoption of the prudent investor rule, which was signed into law last month. Results of the study are expected as early as mid-October.
The fund now has a 40% cap on equities, but invests another 10% in equities through a basket clause. The rest of the asset mix is 43% bonds, 2% cash and 5% real estate.
Becker Burke will assist.
Ohio interviewing custodian finalists
COLUMBUS, Ohio -- Ohio State University's $928 million endowment will begin interviewing custodian candidates this week, said James L. Nicholas, treasurer.
Incumbent National City Bank's contract is expiring. The search is being conducted in-house.
Illinois Muni continues to use Mercer as consultant
OAK BROOK, Ill. -- The $12.6 billion Illinois Municipal Retirement Fund will keep Mercer as investment consultant.
Following Don Brackey's June departure from the firm, Illinois Municipal conducted a search, in which Callan and Ennis Knupp also were finalists.
Lowell Retirement System reviewing asset mix
LOWELL, Mass. -- The $135 million Lowell Retirement System's new consultant, H.C. Wainwright, is conducting an asset allocation study for the retirement system.
The study should be completed sometime in the fall, said Dick Zaccaro, the consultant.
Manchester broadens fixed-income mandates
MANCHESTER, Conn. -- The $85 million Manchester Retirement Allowance Fund is planning to tweak its investment portfolio by broadening the mandates of its fixed-income managers, said Alan Desmarais, director of finance.
At the Sept. 16 board meeting, PaineWebber, the fund's consultant, will present proposals for giving the fixed-income managers more flexibility by allowing them to invest a small portion of their assets in international securities, and allowing them to invest in longer duration bonds, Mr. Desmarais said.
The fund has $32 million in fixed income with Smith Affiliated Capital and INVESCO.
Wisconsin utility doubles international, cuts realty
MILWAUKEE -- The $825 million Wisconsin Electric Power Co. pension fund doubled its exposure to international equity and officially dropped its 7% allocation to real estate, although that portfolio already had been liquidated.
The moves follow an asset/liability study.
The new allocation leaves the U.S. bond allocation unchanged at 30% of total assets and boosts stocks to 70%. The equity allocation is split, with 50% in U.S. stocks and 20% international stocks.
Officials are looking at the manager lineup and considering how to implement the new allocation. It is not known whether there will be a search. Final decisions will be made early next year.
Callan is assisting.
Woburn Retirement System adopts new allocation
WOBURN, Mass. -- The $58 million Woburn Retirement System adopted a new asset allocation presented by H.C. Wainwright, its consultant.
The system will aim for 9.5% in domestic large-cap value equities; 8.5% in domestic large-cap growth stock; 8% in domestic midcap value stock; and 7.2% in domestic midcap growth.
The system also will seek to maintain 6% in domestic small-cap value stocks and 5.5% in domestic small-cap value stocks; 7.35% in EAFE stocks; 0.15% in emerging markets; 8.5% in short-term corporate bonds; 9% in intermediate bonds; 10% in long-term bonds; 5.8% in high yield bonds; and 6% in international bonds. The fund will have 4% in real estate and 4.5% in alternative investments.
The fund will review managers at its Sept. 28 meeting and decide on searches for new managers.
Contra Costa fund reviews domestic equity assets
CONCORD, Calif. -- The $2.5 billion Contra Costa Employees' Retirement Association, instructed it consultant, Dorn Helliesen & Cottle, to begin a review of its domestic equity assets.
The study might recommend increasing the fund's indexing of domestic equity assets. The fund currently has 42% of total assets in domestic equity and 38% of domestic equity assets are indexed. The study is expected to be completed by year end.
The system also committed $25 million to Hearthstone Multi-State Home Building Investors Fund II. The money will come from cash, said Pat Wiegart, chief executive officer. The fund previously committed $15 million to Hearthstone Multi-State Home Building Investors Fund I.
Louisiana Employees to hire 2 managers this month
BATON ROUGE -- The $5.6 billion Louisiana State Employees' Retirement plan picked finalists in searches for international private equity and event-driven merger arbitrage managers.
Finalists for international private equity are Pacific Corporate Group and HarbourVest Partners. Merger arbitrage finalists are Halcyon-Alan B. Slifka and Kellner, DiLeo.
Portfolio sizes and managers will be decided on Sept. 25.
The fund's real estate portfolio will be liquidated and reallocated to the new managers.
New England Pension Consultants is assisting.
Separately, the fund committed $30 million to the 1999 Brinson Partnership Fund Trust, a multistrategy private equity fund. The fund currently has $210 million in Brinson's series of trusts.
San Francisco fund has $1 billion surplus
SAN FRANCISCO -- The $10 billion San Francisco City & County Employees' Retirement System has about $1 billion in surplus assets.
Staff members told the board of trustees the city won't have to make contributions to the plan for 15 to 20 years, barring a negative hit in investment returns or major increases in benefits.
Houston firefighters to pick finalists
HOUSTON -- The $1.49 billion Houston Firemen's Relief & Retirement Fund will pick four finalists in October in its search for an active emerging markets equity manager, said Danny J. Bowers Jr., CIO.
The new manager will run $50 million; the portfolio will be funded from cash.
A final decision is expected by November.
The fund is "looking for higher returns from alternative investments and emerging markets" following a recently completed asset allocation study, Mr. Bowers said. He added that Houston Firefighters' has a few million dollars in emerging market equities as part of an EAFE portfolio.
City of Tampa finishing small-cap equity search
TAMPA -- The $450 million City of Tampa General Employees' Retirement Fund narrowed its search for a small-cap equity manager to three finalists and will make a final decision at its Sept. 15 board meeting, said Andrew Hirsch, chairman.
The finalists are Benson Associates, Wellington Management and Farrell-Wako Global Investment. Mr. Hirsch said the new $16 million portfolio will be funded by reducing other allocations.
William M. Mercer is assisting.
Springfield, Mass., fund nears foreign hiring
SPRINGFIELD, Mass. -- The $244 million Springfield Retirement System narrowed a search for its first international equity manager to Silchester, Putnam, Montgomery, Templeton and MFS. The new manager will run $35 million.
William Monagle, the Wellesley Group consultant to the fund, said trustees will make a final decision Sept. 15.
Small-cap hunt entering final stages
ANN ARBOR, Mich. -- The $190 million Washtenaw County Retirement System is expected to name finalists for its small-cap manager search at its Sept. 23 board meeting, said Catherine McClary, treasurer.
The fund will determine the allocation amount and the funding source at that time.
SEI Capital Resources is assisting.
Allentown narrows consultant search
ALLENTOWN, Pa. -- The City of Allentown, with $140 million in pension assets, has narrowed its search for a new investment consultant to five finalists, said Linda Bodnar, director of finance.
They are incumbent Legg Mason, Smith Barney, Morgan Stanley Dean Witter, Spagnola Cosack and SEI.
A decision is expected by November.
Holyoke selects finalists in 2 asset classes
HOLYOKE, Mass. -- The Holyoke Retirement System, with about $110 million in assets, has picked finalists in searches for managers in two new asset classes -- high-yield bonds, and midcap domestic equities, said Daniel R. Owens, executive director.
The system picked Loomis, Sayles; Salomon Brothers Asset Management; and Putnam Investments as finalists to manage a $7.5 million high-yield bond portfolio.
Boston Co. Asset Management, Invista Capital Management and Trinity Investment Management are finalists to run a $7.5 million core midcap equity portfolio.
The board will pick the new managers on Sept. 16. Funding will come from cash flow and from reducing the portfolio of fixed-income manager Freedom Capital, which runs about $75 million, Mr. Owens said.
San Joaquin fund close to finding small-cap manager
San Joaquin County Employees' Retirement Association, Stockton, Calif., has narrowed its search for its first small-cap value manager to four finalists, said Robert Palmer, retirement administrator for the $1.2 billion fund.
Finalists for the new $50 million portfolio are LSV Asset Management; Lord, Abbett; Rothschild Asset Management; and DePrince, Race & Zollo.
Mr. Palmer said funding will come from reducing other allocations, but would not specify which allocations in particular.
A final decision is expected at the board's Sept. 25 meeting.
Strategic Investment Solutions is assisting.
Virginia Systems executives collect bonuses
RICHMOND, Va. -- Some 20 Virginia Retirement System investment officials will collect bonuses ranging from $5,600 to $87,000 for the fiscal year ended June 30, thanks to stellar investment performance at the system, said Nancy Everett, deputy chief investment officer.
Last year, the system's 17 investment staff members collected bonuses ranging from $4,500 to $45,000, for a total of $316,123, she said.
Lincoln National combines 2 units
PHILADELPHIA -- Delaware Investment & Retirement Services, Philadelphia, and Lincoln National Life Insurance, Fort Wayne, Ind., both affiliates of Lincoln National, have combined their defined contribution operations.
Mary Rudie Barneby, president of Delaware Investment & Retirement Services, will head the combined entity, which will manage more than $9 billion in 401(k) assets for 14,000 retirement plans.
Lincoln Life specializes in group annuity investment products with multiple fund options available as separate accounts.
Delaware offers a full-service defined contribution product using Delaware's funds as well as a customized bundled program to businesses with over 1,000 employees.
Mass Mutual enhances 401(k) statements
SPRINGFIELD, Mass. -- MassMutual Retirement Services began distributing enhanced statements to defined contribution plan participants that include a rate of return based on year-to-date cash flow for each individual's account, said Marty McDonough of the firm's marketing division.
The statement also includes personalized graphics that illustrate plan investment performance, account balances, account activity by contribution source and investment option, investment selections by option and asset category for both employee, account balance history and employer contributions and reports on outstanding plan loans.
Marsh & McLennan acquires Sedgwick Group
NEW YORK -- Marsh & McLennan Cos. has agreed to acquire Sedgwick Group PLC for L1.25 billion (U.S.$2 billion). The purchase of London-based Sedgwick is expected to give a boost to Marsh & McLennan's consulting businesses and risk and insurance services.
Under terms of the offer, which was approved by the boards of both companies, Marsh & McLennan will pay 225 pence for each Sedgwick share and L11.25 for each Sedgwick American depository share.
Directors of Sedgwick and other large shareholders have agreed to accept the offer.
"From a strategic standpoint, we believe this transaction will enhance shareholder value through a combination of stronger insurance brokering practices, global reach and operating efficiencies. The addition of Sedgwick will increase our presence in the United Kingdom, continental Europe and Asia" said A.J.C. Smith, chairman and CEO, Marsh & McLennan.
Retirement funds own 35% of mutual fund assets
WASHINGTON -- Retirement plans continue to hold more than 35% of mutual fund assets, according to the Investment Company Institute.
In 1997, retirement plans held 35.5% of mutual fund assets, up slightly from 35.3% in 1996. This level has remained fairly flat since 1994, largely because the stock market's performance had accounted for much of the growth in mutual fund assets, the ICI noted.
Financial firms well prepared to face Y2K problems
NEW YORK -- Financial services firms are second only to computer software firms in their year 2000 preparedness, according to a survey of 116 large firms and 14 government agencies.
Chicago MERC claims it's ready too
CHICAGO -- The Chicago Mercantile Exchange's computers are "well positioned" for the year 2000, said Donald Serpico, executive vice president for operations, speaking before a U.S. Senate panel.
The year 2000 is "a problem of major magnitude and will require cooperation and coordination across the futures and financial services industries," he said.
After assessing its computer programs, systems and software, the CME calculated that 57% of its systems and programs were already year 2000 compliant, he said. That included its clearing system and its forthcoming electronic trading system, he said.
Mr. Serpico told the panel that code fixing and testing should be finished by March 1999. The CME also has contingency plans ready in case of unexpected year 2000-related problems.
In another development, the Merc is looking to trade REIT futures contracts based on the Standard & Poor's REIT Composite Index.
The CME board approved the plan to trade REIT futures, and will seek approval from regulators.
SIA study shows IRAs making comeback
WASHINGTON -- IRAs are making a comeback, thanks to last year's changes in tax laws, according to a survey by the Securities Industry Association released today.
The number of individual retirement accounts grew 13% between December 1997 and April 15, and the value of IRA accounts increased 12%, according to the survey of 14 securities firms.
At the same time, the number of SIMPLE IRA accounts rose more than 50% between year-end 1997, and April 15. Roth IRAs, created under last year's changes in the law, already account for 5% of all IRAs, the SIA pointed out.
Employers do not intend to make up benefits cuts
WASHINGTON -- Working Americans shouldn't count on their employers to make up for any cuts in Social Security benefits if those cuts are called for as part of a fix for the ailing federal program.
That's according to a new survey of approximately 1,300 companies by KPMG Peat Marwick.
Only 18% of those surveyed said they would make up for any cuts in Social Security benefits, while about 29% said they had not decided what to do.
More than 50% said they would not make up those cuts through increased retirement benefits.
Offitbank, a private bank, files to go public
NEW YORK -- Offitbank Holdings Inc. has filed plans for an initial public offering to raise as much as $46 million.
The private banking firm, which manages about $10 billion, is hoping to raise money for acquisitions internationally and in the US.
"Lots of private banking. organizations are seeking to increase their services and a way of doing that is by raising capital," says Ken Hoffman, president of Optima Group, a bank consulting firm in Fairfield, Conn.
Offitbank, formed by Morris Offit in 1983, netted $2.8 million in the first six months of this year -- 73% higher than the 1997 period.
Company officials declined to comment on the IPO.
