Compliance March 26, 2003

Steel, Airlines Weigh on PBGC

March 26, 2003 (PLANSPONSOR.com) - Half of the 10 largest claims against the nation's private pension plan insurer have arisen in the past three years, and the trend shows little sign of abatement, according to new information from the agency.
Reported by

>That data, as well as a wide-ranging number of statistics and data about the insurance program, was published today by the Pension Benefit Guaranty Corporation (PBGC) in a new edition of its annual statistical reference book, the Pension Insurance Data Book 2002.  

>The Data Book notes that gross claims against the PBGC fund from its inception in 1975 forward (excluding the potential claims of Bethlehem Steel and National Steel, estimated at $3.9 billion and $1.3 billion, respectively, by the PBGC), totaled $11.0 billion, with more than half that total coming from just 10 companies.   The Bethlehem Steel claim would represent the largest ever for the PBGC, the National Steel would be the third-largest.   LTV Steel, which the agency picked up in 2002, would fall in between those two.

Get more!  Sign up for PLANSPONSOR newsletters.

“High” Five?

>Of those 10 companies, five were from the steel industry, and three were airlines.   Including the projected impact of Bethlehem and National Steel programs – which will by themselves increase the total claims incurred by the PBGC by nearly 50% – the steel industry has been responsible for 58% of the total claims, while airlines have represented 13%.  

            

>The number of single-employer plans insured by the agency has declined dramatically over the years, to about 30,600 plans from an all-time high of 112,000 plans in 1985.   That decline is primarily a result of a large number of terminations among small plans, according to the PBGC.   Nonetheless, the PBGC now provides pension insurance protection to more than 34 million participants in single employer plans, a 25% increase over the number covered in 1980.   While the number of participants covered has grown, the percentage of those participants that are active workers fell from 78% in 1980 to 53% in 2000, according to the Pension Insurance Data Book 2002.

>Meanwhile, the total number of multiemployer plans insured by the PBGC has declined slowly since 1982, primarily among plans with fewer than 1,000 participants, and primarily due to plan mergers, according to the PBGC.   Still, as with single employer plans, the number of participants in multiemployer covered by the PBGC has risen 19% since 1980 (primarily among plans with more than 5,000 workers), even while the number of plans themselves has fallen.   More than 9.5 million participants in multiemployer plans are now covered by the PBGC.

Data Available

>The data book is available on PBGC’s Web site at http://www.pbgc.gov/publications/databook/databook02.pdf .   Additionally, single copies of the publication may be obtained by writing to: PBGC Data Book, Suite 240, 1200 K Street NW, Washington, DC 20005-4026.   Requests also may be submitted by FAX to (202) 326-4042.

>The PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by workers.   Its two insurance programs cover about 44 million American workers and retirees participating in about 32,500 private-sector defined benefit pension plans, including about 1,650 multiemployer plans.   The agency, which receives no funds from general tax revenues, has operations financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.

Investing March 25, 2003

MSCI Hedge Fund Index Achieves Slight February Gain

March 25, 2003 (PLANSPONSOR.com) - The MSCI Hedge Fund Composite Index chalked up a 0.81% advance in February, slightly lower than January's 1.38%.
Reported by

According to a news release, the MSCI World Equity Index declined 1.9% during the month. Over the past three-year period, the MSCI Hedge Fund Composite Index, which returned 6.59%, has outperformed the MSCI World Equity Index, which returned -17.50%. The MSCI Sovereign Debt Index returned 1.41% for the month of February while LIBOR increased 0.11% for the month.

Other February results included:

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

  • Similar to January, the best performing process group was Directional Trading, which returned 4.01% for February bringing its year-to-date return to 7.59%. Both Systematic Traders, which returned 4.56% in February, and Discretionary Traders, which returned 3.79%, contributed to the outperformance of the Directional Trading Group.
  • Systematic Traders have consistently outperformed other processes with a 9.76% year-to-date return and a 34.35% one-year return.
  • Security Selection and Multi-Process continued to underperform other process groups with a negative return of 0.45% and 0.12%, respectively. On a year-to-date basis through February 28, Security Selection is the only negative process group, returning 0.13%. Within Security Selection, all processes produced negative returns for the month except for Short Bias, which gained 0.40%. On the other hand, Long Bias returned -0.70% making it the worst performing Security Selection process.
  • Relative Value funds returned 0.61% for February mostly driven by Arbitrage at 1.05%. More specifically, Convertible Arbitrage led the way with a 1.48% return and Fixed Income Arbitrage followed behind at 0.65%. Long-Short Credit, which returned 1.29% for the month, helped Specialist Credit funds become the second best performing process group for February at 1.06%, bringing its year-to-date return to 2.79%.
  • The MSCI Hedge Fund Fixed Income Index advanced1.12% in February, outperforming the MSCI Hedge Fund Equity Index which dropped by 0.32%. These results were consistent with Specialist Credit funds outperforming Security Selection funds over the same period.

The MSCI Hedge Fund Diversified Index, which reflects hedge funds that invest in equity, fixed income, commodities and currencies, was the best performing asset class index returning 2.76% in February and bringing its year-to-date return to 6.06%. Directional Traders who invest primarily in diversified asset classes, including commodities and currencies, drove the returns for this index.

The MSCI Hedge Fund Developed Market Index, which returned 0.85%, slightly outperformed the MSCI Hedge Fund Emerging Market Index at 0.77%, but both outperformed their relevant equity indices. These hedge fund results were consistent with equity markets given that the MSCI Emerging Markets Free Index, which declined 3.20%, underperformed MSCI World Equity Index, which declined 1.90%. In contrast to last month, hedge funds investing in Europe, which returned -0.26%, underperformed those investing in North America, which returned 0.40%. Japan funds returned 0.22% in February.

The MSCI Hedge Fund Indices are composed of more than 160 indices. More than 1,700 hedge funds have agreed to participate in the database.

«