The Federal Reserve Board cut both the federal funds rate and the discount rate today, lowering fed funds to 5.25% from 5.5%, and lowering the discount rate to 5% from 5.25%. The cut in the discount rate was its first move since about a year ago, when the Fed had raised it 50 basis points, said Mark J. Giura, vice president for Van Kampen American Capital. The bond market reacted favorably, with Eurodollar futures climbing four basis points immediately following the decision, and U.S. Treasury bond futures rising 1/4 to 3/8, he said. All median equity portfolios underperformed the S&P 500 for the quarter ended Dec. 31, and almost all underperformed the index for the year, the PIPER Managed Accounts report shows. The S&P 500 returned 6% for the quarter, vs. 4.1% for the overall equity median; for the year, the S&P returned 37.6%, while the overall equity median was 33.3%. Core large-cap equity portfolios underperformed the index for the quarter (with 5.4%), but outperformed for the year (37.7%). The median small-cap growth portfolio returned only 1.8% for the quarter, but 36.8% for the year. In fixed income, only broad market and long duration bonds beat the Salomon Broad Bond Index for the quarter and the year. While the index returned 4.3% for the quarter and 18.6% for the year, the median broad market account returned 4.5% and 18.9%, respectively, and the median long duration bond account returned 7.2% and 27.1%, respectively. Median international equity and global equity accounts also underperformed the MSCI EAFE and World indexes for both the quarter and year ended Dec. 31. The median international equity return was 3% for the quarter and 11.4% for the year, compared with the EAFE's 4.1% for the quarter and 11.6% for the year. The median global equity portfolio returned 3.4% for the quarter and 17.4% for the year; the World Index returned 4.9% for the quarter and 21.4% for the year. Bringing an end to a lengthy legal battle between Evangelical Lutheran pension officials and a group of dissident plan participants, the Minnesota Supreme Court upheld an appellate court's decision that said the pension fund's South Africa investment policy was not under civil court jurisdiction. A group of pastors and lay personnel had sued the Board of Pensions of the Evangelical Lutheran Church in America over South Africa divestiture. The appeals court had said the investment policy was motivated by the church's active opposition to apartheid, and therefore wasn't a civil court matter. The approximately $50 million Braintree (Mass.) Contributory Retirement System has diversified its portfolio, hiring its first international equity manager, a domestic index manager and a real estate manager. Phyllis DiPalma, executive director, said Boston Co. will run $5 million in international stocks; State Street Global Advisors, $15 million in a Russell 3000 fund; and Metric Institutional Realty, $1 million in real estate. The board also is expected to hire another core real estate manager for about $1 million. The system previously had all of its assets in a balanced fund with 1838 Investment Advisors; 1838 continues to manage the remainder.The changes are the result of an asset allocation study conducted by The Hannah Group. The Hull (Mass.) Town Retirement System hired Freedom Capital and State Street Bank. Each will manage half of the $7.5 million fund, said Emily A. O'Brien, town accountant and ex-officio pension fund board member. State Street Bank will manage its share in the Strategic Active Management stock and bond funds; Freedom, in a balanced fund. Capital House, a Scottish money management firm no longer operating in the United States, had been sole manager, Ms. O'Brien said. The $200 million Christian Schools International pension fund, Grand Rapids, Mich., picked incumbents Aeltus Investment Management and Heitman/JMB to run a new real estate allocation, said Gerald Knol, manager-trust fund investments. The fund doubled its real estate allocation to 6% of assets.