Compliance August 18, 2003

DoL Gives Thumbs Up to NWA Stock Pension Contribution

August 18, 2003 (PLANSPONSOR.com) - Struggling air carrier Northwest Airlines got the green light Monday from federal officials to contribute stock to its three defined benefit pension plans in lieu of cash.
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>The US Department of Labor’s Employee Benefits Security Administration (EBSA) announced that it had decided that the transactions would be in the interest of and protective of the pension plans’ workers and retirees based on the input of interested parties and the adoption of additional protections. The exemption allows Northwest to make in-kind contributions to its plans of stock of Pinnacle Airlines Corporation, a regional Northwest affiliate (See  NW Airlines Seeks OK for Stock Contribution to Pensions ).

>According to the DoL news release, the proposed exemption would permit in addition to the in-kind contribution:

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  • holding of the stock by the plans
  • the sale of the stock by the plans to Northwest
  • the acquisition and exercise by the plans of a put option granted by Northwest
  • the guaranty to the plans by Northwest Airlines Corporation of Northwest’s obligation to honor the put option.

>An independent fiduciary has been retained by the pension plans to establish the fair market value of the Pinnacle stock and to determine that the stock is a prudent investment for the plans, the DoL announcement said.   The plans will receive financial protections and governance rights as negotiated by the independent fiduciary on their behalf.

>ERISA generally prohibits in-kind contributions except under certain statutory exceptions or if the DoL grants an exemption that protects the interests of workers and retirees covered by the plan. The Northwest Airlines exemption will be published in the August 19, 2003 Federal Register.  Northwest, headquartered in Eagan, Minnesota, sponsors the three plans for 72,854 employees nationwide.  

Investing August 15, 2003

CSFB/Tremont: Hedge Funds Squeeze Out 0.08% July Gain

August 15, 2003 (PLANSPONSOR.com) - The CSFB/Tremont Index managed to wring out a 0.08% gain in July, on the back of Distressed Securities.
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The Distressed Securities Index’s 1.18% gain was enough to prop up the composite, now up 8.03% year-to-date.   In June, the aggregate was up 0.83%, according to data released by CSFB/Tremont Index.

Overall, results among the Index components were evenly mixed between gainers and losers.   After Distressed Securities, now up 15.41% YTD, was the Event Driven Index with a 0.95% gain (12.08% YTD).   Among the other monthly winners:

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  • Event Driven Multi-Strategy – 0.81%
  • Equity Market Neutral – 0.68%
  • Emerging Markets – 0.56%
  • Risk Arbitrage – 0.48%

Conversely, the Managed Futures Index, lost 2.75% in July, its second losing month in a row.   However, for the year, Managed Futures are still on the positive side, up 7.47%.   Among the month’s other indexes in the red:

  • Dedicated Short Bias – off 2.06%
  • Fixed Income Arbitrage – down 0.98%
  • Convertible Arbitrage – lower by 0.35%

Performance for the CSFB/Tremont Hedge Fund Index is calculated monthly.  Full July and year-to-date returns for all categories are at  www.hedgeindex.com .

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