Pension executives say the increasingly public battle between Bankers Trust Co. and Procter & Gamble Co. over derivatives losses isn't affecting their relationships with Bankers Trust.
Recently released transcripts of damaging statements made by Bankers Trust executives raised a few questions about Bankers Trust among some plan sponsors, who asked to not be identified. But in general, BT's standing in investment management, trust and custody is not in jeopardy because of the dispute.
Alan Hanson, a spokesman for Bankers Trust, said its money management business has in no way been affected by its dealings with Procter & Gamble.
Jeffrey W. States, director-investments at the $3.5 billion New Mexico Public Employees' Retirement Association, Santa Fe, said there has been no change in the relationship between the system and BT since the derivatives saga began unfolding nearly two years ago.
BT manages a $1 billion index fund for New Mexico PERA.
"We have watched it all very carefully," said Mr. States. "And to be honest....we are comfortable with the portfolio they have managed for us ....We haven't considered making any changes."
Sandoz Corp., whose treasury operation lost $78 million in derivative transactions with BT (according to P&G's court filings), has maintained its ties on the pension side with the company. Robert Hunkeler, manager-funds management at Sandoz in New York, said he remains "completely satisfied" with BT, which manages about $150 million in passive equities for Sandoz.
"They have done a good job for us and we don't see any reason to make any changes," he said.
Len Haussler, assistant treasurer of Cincinnati Bell Inc., in P&G's hometown, said the brouhaha has had "no effect" on the fund's relationship with BT. Mr. Haussler said Cincinnati Bell has been "unscathed" by the BT derivatives issue. BT is trustee for its pension funds and manages some passive domestic bonds for Cincinnati Bell, he said.
One plan sponsor that deals directly with BT's derivatives business has not changed its view of the company.
"This is kind of old," said Paul Boland, treasurer and tax collector for San Diego County, Calif. Mr. Boland oversees the county's $2.4 billion San Diego County Employees' Retirement Association pension fund. He said the fund's executives continue to meet with BT executives regarding potential swap transactions with the fund.
He said the San Diego County fund has used swaps that are much simpler in nature than those some other users were doing.
Several other pension executives voiced support for BT, including Carl E. Paxton, director-purchasing and insurance at MAPCO Inc., Tulsa, Okla.
"We are getting a constant flow of information" from the bank relative to the derivatives situation, said Mr. Paxton. "They have their position and they want to make that known to their clients. We do follow the situation and we do have some concerns about how it may affect their other lines of business, but we have information indicating that it isn't affecting those areas in which we are concerned. We feel confident their other operations are not affected."
MAPCO uses BT as its custodian and record keeper for the company's $200 million 401(k) plan. The plan also offers the BT family of mutual funds to its plan participants.
A spokesman for the $3.5 billion Rhode Island Retirement Systems, Providence, said there has been no change in its relationship with BT, and there are "no plans to drop or even re-evaluate" BT, which manages $375 million in passive equities for Rhode Island.
Richard Holbein, president of Holbein Associates Inc., a Dallas pension consultant, said he has not seen any spillover from the derivatives-related problems.
"In any firm as large as Bankers Trust, there can be pockets of things which aren't adequately supervised. That may be what has happened here. There won't be any big impact on the firm in other areas, but it probably doesn't paint a very good picture for them. The people I have dealt with have been very upstanding. I have no problems working with any of their people. I have no problem recommending Bankers Trust as a money manager or as a custodian, but I'd stay away from the derivatives for a while," said Mr. Holbein.
Another sign that the pension business is OK at Bankers Trust is the absence of rumors that the firm is getting out of the business, through a merger or spinoff, investment bankers report.
And even with derivatives problems at various institutions, it appears their use among pension plans has not been terribly affected, said John Webster, a partner with Greenwich Associates Inc., a Greenwich, Conn., research firm.