CLEVELAND - The $1.3 billion Eaton Corp. pension fund is doubling its international equities to nearly 15%, said Robert A. Elliott, manager-cash planning and pension investments.
The fund hired three managers, making allocations to international small-capitalization stocks, emerging markets and indexing.
In boosting its international equity allocation, the fund will wind down derivatives positions with another manager it has used as a temporary means to gain synthetic international equity exposure.
Of the new managers hired, the fund assigned Commercial Union Investment Management Corp., London, a unit of the U.K.-based insurance company Commercial Union PLC, $100 million to split between two of its active commingled funds, International Equity Trust and Emerging Markets Trust.
Mr. Elliott said Commercial Union will have some discretion on how much to allocate between the two funds, although Eaton is placing a 25% maximum to the emerging markets fund.
Eaton plans to fund the Commercial Union allocation gradually, expecting to fully fund it by the end of August.
The fund also hired Capital Guardian Trust Co., Los Angeles, assigning it $25 million for an active international small-stock pooled fund, investing mostly in established markets. Eaton is funding that allocation immediately.
That is Capital Guardian's second international assignment for Eaton. Last year, Eaton hired Capital Guardian to run $25 million in emerging markets.
The third international manager the fund hired is Bankers Trust Co., New York. It will manage an index fund tracking the Morgan Stanley Capital International Europe Australasia Far East Index excluding Japan. Mr. Elliott said the fund wants to lighten exposure to Japan.
Mr. Elliott said Eaton is uncertain when it will fund the indexing assignment. It is considering assigning $25 million to Bankers.
He said Eaton will use the international index fund in part to move some money quickly in and out of international markets.
Funding for Commercial Union and Capital Guardian will come from reducing a Standard & Poor's 500 index fund run by Bankers Trust by $100 million to $150 million and also from reducing an international derivatives position by $25 million.
Advanced Investment Management L.P., Pittsburgh, runs the derivatives. Eaton will leave only a small amount with AIM.
Mr. Elliott said Eaton has used the AIM allocation, mostly invested in over-the-counter swaps, over the last several years as a temporary measure to give the pension fund added international exposure through equity synthetics until it could hire additional international equity managers.