Plan sponsors ease social consciences

Article Abstract:

Approximately 300 U.S. corporations continue to do business in South Africa, despite its oppressive regime; however, pension plan investment managers are avoiding investing funds in these corporations. Prior to making an investment decision based upon social conscience, the pension plan manager should (1) ensure that the portfolio's diversification will not suffer from the omission, (2) determine how the omission will affect the portfolio's ability to outperform the market, and (3) analyze transaction costs related to selling a socially unacceptable stock, prior to divestment. According to research performed by U.S. Trust Co. (of Boston), the economic risk for portfolio managers is not significantly changed when the 200 stocks related to South Africa are excluded as investment possibilities.

Social aspects, Research, Planning, Investments, Portfolio management, South Africa, Retirement income, United States Trust Company of New York, Retirement pensions

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Higher PBGC rates, rule changes won't kill defined benefit plans

Article Abstract:

Premiums paid to the Pension Benefit Guaranty Corp. (PBGC) by companies sponsoring defined benefit plans are expected to increase more than 300 percent in 1986. Higher PBGC rates may be offset by reducing the number of participants in a plan; alternatively, some companies may switch to a defined contribution plan. Financially sound benefit plans, however, may not be so adversely affected by the proposed PBGC rate increase, if a risk-related premium system is installed. Such a system would require underfunded pension plans to pay a higher annual per-participant premium than would financially sound plans. In addition, proposed changes in plan termination rules may benefit healthy plans.

Finance, Prices and rates, Pension Benefit Guaranty Corp.

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Pension fund managers' fees may be based on performance

Article Abstract:

The Securities and Exchange Commission (SEC) has ruled that money managers may charge, in addition to their flat fee, a performance fee based on the increase in the value of the client's portfolio. The SEC does not specify how performance fees should be structured, so the specific formula may be negotiated between the client and the investment manager, including a possible penalty for poor performance. Many states, however, have laws prohibiting performance fee arrangements. Pension plan sponsors should get approval from the U.S. Department of Labor before negotiating performance fees.

Laws, regulations and rules, Investment advisers, United States. Securities and Exchange Commission

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