US - The Pension Benefit Guaranty Corp. has terminated the combined US$2.5bn mandates awarded to BlackRock, Goldman Sachs Asset Management and JPMorgan, but denies the move is a result of controversy surrounding the appointments.
The firms were hired to run private equity and real estate mandates. But the hires came under scrutiny when it was alleged that Charles Millard, the former PBGC director, ignored the black-out period during the bidding process and had e-mail and phone correspondence with the firms. (Global Pensions; May 21, 2009)
BlackRock spokesman Brian Beades said: "We are confident that neither the company nor any of its employees did anything improper or illegal."
Officials at Goldman said the firm had been in contact with the PBGC, but that all contact was legal. Spokeswoman Andrea Raphael said: "The pre-RFP market research and analysis we provided to the PBGC were appropriate and encouraged under FAR 15.201... Under FAR 9.5, the PBGC contracting officer would be required to identify potential conflicts of interest. No conflict was brought to our attention."
PBGC spokesman Jeffrey Speicher said there was no correlation between Millard's alleged actions and the terminations, and that the move is a result of an investment policy review.
"I wouldn't draw a link," he said.
Speicher said the PBGC board, which changed when president Barack Obama came into office, has suspended the existing policy and is reviewing its current investment line-up.
The PBGC currently invests 30% in equities, 68% in bonds, and less than 2% in alternatives. The PBGC's investments in alternatives, like private equity and real estate, have all been inherited from failed pension plans.
In May, the PBGC reported a $33.5bn deficit at the end of the first quarter, three times the deficit posted six months earlier, and the largest hole in the corporation's 35-year history. (Global Pensions; May 20, 2009)
The mandates with the three firms had not been funded.
Beades and Raphael declined to comment on the termination. An official at JPMorgan was not immediately reached.