PBGC Will Develop New Investment Policy

The Pension Benefit Guaranty Corp. plans to create a new investment policy to replace the one adopted during the Bush administration, PBGC spokesman Jeffrey Speicher said.

Speicher declined to speculate on what the new policy would be or when it would be announced.

“We await the board’s decision on how our assets will be allocated in the future,” Speicher said in an interview.

Under the PBGC’s existing investment policy, adopted by the PBGC board in February 2008, 45 percent of the $48 billion in assets available for investment were supposed to be in equities, 45 percent in fixed income and 10 percent in alternatives. This policy has been suspended by the PBGC board, Speicher said.

Previously, 75 to 85 percent of the PBGC’s assets were in a liability-driven investment strategy, with the balance invested in stocks.

In a May 20 news release, the PBGC said that as of April 30, about 30 percent of its assets were invested in equities and 68 percent were in bonds, with less than 2 percent in alternatives. According to that release, all of the PBGC’s alternative investments were inherited from pension plans the agency took over.

As part of its pending change in plans, the PBGC on July 20 terminated BlackRock, JPMorgan Asset Management and Goldman Sachs Asset Management, which had been hired in December to run a combined $2.5 billion in real estate and private equity for the PBGC.

The contracts, which had not been funded, were canceled following allegations that Charles E.F. Millard, former PBGC director, had inappropriate contact with the managers before they were hired.

In a statement, Stanley M. Brand, Millard’s attorney, said that Millard had sought to implement a policy change to secure the agency’s future.

“He sought advice from top professionals in a responsible and legal manner,” Brand said. “The choices that he, his colleagues and PBGC’s board of directors made were strictly on the merits.”

Brian Beades, a BlackRock spokesman, said, “We are confident that neither the company nor any of its employees did anything improper or illegal.”

Mary Sedarat, a spokeswoman for JPMorgan, declined comment.

Andrea Rafael, a spokeswoman for Goldman Sachs, did not immediately return telephone calls seeking comment

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.