UBS to Compensate US Pension Fund

Brennan Succeeds Bolsover at Baring Asset Management
Baring Asset Management, a unit of ING Group, has appointed David Brennan chairman and chief executive, effective July 1.Brennan has been with the company for 14 years and has been chief executive of the Investment Management Group for the past five years. He was appointed deputy chairman in 2001, according to Dow Jones.Brennan succeeds John Bolsover who will retire at the end of June.Peter Wolton will replace Brennan as chief executive of the Investment Management Group.3Plansponsor.comUK: Stakeholder Pension Revolution Fails to Ignite
The UK’s stakeholder pension program, touted as the solution to the nation’s savings shortfall, is failing to live up to the government’s expectations, a study has shown.The government had hoped that half of the UK’s five million low-income earners, who have no access to employer sponsored plans, would take advantage of the stakeholder pension plans, which charge lower management fees.However, according to the Association of British Insurers (ABI), only 619 million flowed into the new plans by the end of 2001, nowhere close to the estimated savings shortfall of 27 billion per year. The figures, gathered from the 47 of the 50 stakeholder plan providers, showed that around 750,000 people had bought a stakeholder pension by the end of February, and contributed 81 per month to the plan on average The minimum contribution is 20 a month and the maximum is 3,600 per annum.These numbers are inflated by two factors:retirement savers, who are transferring money from existing plans into stakeholder plans to take advantage of the lower fees workers, who are contributing through an employer-based plan. Small businesses that don’t provide retirement plans to their employees must arrange stakeholder pensions for them.About 320,000 employers were now making stakeholder pensions available to their staff, falling short of the government’s target of 350,000, according to the ABI.The ABI also noted that while limited data was available on the income levels of stakeholder investors, the data that were available showed that most were earning between 10,000 and 30,000 per year. The government had aimed to attract those earning 9,000 and 18,000.The stakeholder pension plan however, has not been a total disaster. After being introduced in a difficult year for investing, it has forced changes in the industry, placing downward pressure on management fees and forcing consolidation. There is also the expectation that the government may make employers’ contributions to stakeholder plans compulsory.3Plansponsor.comEnron Lawyers Baulk at State Street Fees
A much ballyhooed agreement brokered by the US Department (DoL) to install new management over Enron’s retirement plans is apparently unravelling. According to a Houston Chronicle report, Enron lawyers complained to US Bankruptcy Judge Arthur Gonzalez that the company should not be required to pay $2.7 million yearly to hire State Street Bank and Trust to oversee its three retirement programs. Together, the plans have about $1 billion in assets.Enron attorney Brian Rosen said the company didn’t want to be “taxed” by being responsible for State Street’s fees. Gonzalez ruled that the plan members should foot State Street’s bill (see Judge Overrides DOL, State Street Agreement on Enron) and that the Boston-based State Street should continue managing the plans until the issue is resolved. State Street Ponders ResponseRoseman told Gonzalez that State Street has to decide whether it will stay in the deal if the plans end up paying the company’s fees. Enron’s sudden turnaround comes after the company signed a DoL agreement to bring in State Street to replace Enron’s existing pension committee. For their part, DoL officials urged a swift end to the controversy. DoL lawyer Timothy Hauser said an undue delay would only further hurt Enron employees and former workers who already have lost thousands of dollars in retirement funds when Enron imploded. If Enron sticks to its position of departing the State Street deal, DoL may sue the company to force the appointment of a new pension manager. UBS to Compensate US Pension Fund
UBS PaineWebber will pay $10.3 million to the City of Nashville to settle a dispute over the amount of the firm’s fees as exclusive investment consultant to Nashville’s pension fund.Government officials had also complained that UBS PaineWebber understated the risks of the investments it recommended and misled them about its recommended investment strategies. The fund ended its relationship with PaineWebber in 2000.The cornerstone of the deal – that PaineWebber would be paid based on the number of portfolio trades – became a key part of the dispute. Many in the investment community charge that such a compensation arrangement gives an advisor too great an incentive to advise unnecessarily frequent trades.The lion’s share of the settlement will go to the $1.4 billion fund, which covers city employees. The remainder will pay legal fees.”We felt they were overcompensated, we felt the agreements were not clear, and we thought we could have gotten a better deal,” said Karl Dean, director of law at the legal department of the Metropolitan Government of Nashville and Davidson County, Tennessee. Fund Made Money Nashville officials may have had problems with PaineWebber’s fees and some of its consulting, but the fact remains that the city’s pension fund made money with PaineWebber’s advice. For the five years ended December 1999, for example, the fund had an average annual gain of 18.47%.But a KPMG April 200 audit maintained that PaineWebber’s fee arrangement was poisoned with potential conflicts and built up too many trading commissions. The audit also concluded that PaineWebber had misrepresented the consequences of some of its advice.CriticismBecause of the fund’s unusual fee and commission arrangement, PaineWebber earned excessively high fees on its trades, KPMG concluded. For the year ended June 30, 1999, consulting fees were $788,747, compared with fees for similar public funds of $92,000 to $163,000 in 1998. PaineWebber also kept the pension fund in the dark about its individual managers’ returns and risks in the portfolio, according to the KPMG review.A PaineWebber spokesman said: “The Nashville Metro Board pension fund had an outstanding record of performance while UBS PaineWebber was a consultant to the fund. UBS PaineWebber strongly disagrees with the one-sided criticisms and conclusions in the KPMG report. Although we believe that our compensation was reasonable, we decided to resolve this matter amicably.”3Plansponsor.com