Investing May 13, 2009

DC Plans See Widespread Equity Losses in Q109

May 13, 2009 (PLANSPONSOR.com) - Mercer's first-quarter 2009 Defined Contribution Universe Summary found losses in all equity markets during the period.
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A Mercer news release said the balanced asset class, using a benchmark of 60% S&P 500/40% Barclays Capital Aggregate Bond Indices, posted a 6.5%-loss. International equity markets, as measured by the MSCI EAFE Index, lost 13.9% during the period.

Mercer data showed the international equity asset class underperformed U.S. equities for the quarter by 290 basis points. Global equities lost 11.9% for the quarter and outperformed international equities by 200 basis points.

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According to Mercer, growth funds outperformed value funds during the first quarter, as the median large cap growth fund posted a loss of 4.7% compared to a loss of 12.9% for the median large cap value fund. The small cap segment of the market trended in the same direction as large cap stocks, as the median small cap growth fund outperformed the median small cap value fund by 710 basis points.

The median large cap fund outperformed the S&P 500 Index by 120 basis points for the first quarter. Small cap funds underperformed their large cap counterparts for the quarter, as the median small cap fund lost 12.9% for the quarter versus a loss of 9.8% for the median large cap fund.

Within the international equity asset class, the median manager outperformed the MSCI EAFE Index by 130 basis points during the quarter. The median emerging markets manager lost 1.4% for the quarter and underperformed the MSCI Emerging Markets Free Index by 240 basis points, according to the Mercer data.

The median core fixed income fund outperformed the Barclays Capital Aggregate Bond Index for the first quarter by 30 basis points. Mercer said the S&P 500 Index lost 11% during the quarter while the fixed income asset class was flat for the quarter, with the Barclays Capital Aggregate Bond Index posting a 0.1% gain. Money market instruments had a zero return, as measured by the three-month T-bill rate.

According to the report, capital market returns remained negative over the long term as losses during the first quarter of 2009 affected results. Over a 10-year time frame, the S&P 500 Index lost 3%, while the Russell 2000 Index gained 1.9%.

The survey report is available at http://www.mercer.us/referencecontent.htm?idContent=1335980 .

Administration May 12, 2009

Guilty Plea Expected from West Coast Placement Agent in Pension Probe

May 12, 2009 (PLANSPONSOR.com) - The Wall Street Journal is reporting that an associate of the indicated political operative charged in the ongoing New York pension pay-to-play investigation is expected to plead guilty to a misdemeanor and agree to cooperate in the investigation.
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According to the Journal, quoting unnamed sources,Julio Ramirez, 48, is the second person in the two-year-old probe to plead guilty and the sixth to be criminally charged. The newspaper said the Securities and Exchange Commission, which is working with New York Attorney General Andrew Cuomo in the investigation, is also expected to announce civil charges against Ramirez.

Both Ramirez and Hank Morris, the indicted political adviser charged in the pension probe, are placement agents who earn fees from private equity or hedge fund firms in exchange for securing a pension investment management mandate (see  Report: Auto Czar’s Investment Firm Focus of Pay-to-Play Probe ).

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Ramirez, based in the Los Angeles area, is pleading guilty for his participation in a series of fraudulent transactions between Morris and others, the Journal quoted its anonymous sources as saying.  

According to the Journal, Ramirez’ guilty plea comes in connection with dealings between Morris and a Los Angeles-based placement agent firm called Wetherly Capital Group (see  Harrigan Resigns from LA Pension Board ), as well as a Dallas-based firm called Aldus Equity Partners (see DiNapoli Sues Aldus over Pay-to-Play Scheme ).

The news report indicated that Ramirez recommended to Wetherly in 2003, where he was then employed, that the firm work with Morris to get pension business, according to a Wetherly spokesman.

Wetherly has not been accused of wrongdoing.

Separately, Ramirez told Saul Meyer in 2004, founder of Aldus Equity, that Aldus should hire Morris if it wanted help securing money from New York’s state pension fund, according to people familiar with the matter, the Journal reported.

Meyer last month was charged with securities fraud in the case by the New York attorney general. He has pleaded not guilty.

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