International round-up

By staff
Mon 07 May 2007

Warburg to raise US$15b; Hedge fund's pay; Pensions look to hedge; Fremont General sued; Boost for Siemens' pension; Mounties investigate themselves; Ciba dumps BlackRock for Insight; UK liabilities up £30b.

Warburg to raise US$15b

United States private equity group Warburg Pincus aims to raise as much as US$15 billion ($18 billion) for its biggest fund so far, according to reports.

A representative for the company told Investor Weekly there had been no official comments made in regard to press reports of a new fund.

United Kingdom newspaper, The Financial Times, reported the fresh fundraising effort by Warburg would aim at several of its largest investors, including the US states of Washington, Florida and New Jersey and the corporate pension funds of IBM and AT&T. But Warburg was also looking to attract new sources of capital.

Market sources say the fundraising exercise is expected to be launched within the next two months. If the fund goes ahead, Warburg would nearly double the size of its current global fund.

Warburg Pincus is currently investing from its eleventh fund, Warburg Pincus IX, a US$8 billion ($9.6 billion) global fund.
In 2006, the firm closed Warburg Pincus Real Estate I, a US$1.2 billion ($1.45 billion) fund dedicated to investing in real estate opportunities worldwide.

Hedge fund's pay

It is no wonder hedge funds are a hot topic around the world with the massive amount of earnings available for those in the top end of the business.

The average pay for a hedge fund chief executive is US$4.9 million ($6 million), according to the Alpha Hedge Fund Compensation report conducted by US-based Institutional Investor magazine.

It was the group's first poll of compensation practices in the industry and illustrated just how much money is thrown around in the market.

The magazine said it ran the poll because industry professionals were as secretive on pay as they were on investment strategies.

"With a little luck and a lot of savvy, analysts and traders can dream of winning their places on our list of top 25 earners in the business. The minimum required this year is US$240 million ($301 million)," the report said.

Pensions look to hedgeMany big companies with 401(k) pension plans are seeking advice about how their pension plans could begin to invest in hedge funds, according to US consulting firm Watson Wyatt.

A spokesperson for Watson Wyatt in New York told Investor Weekly that many consultants were reporting that companies were looking to get hedge fund investments into their 401(k) pension strategies.

Fremont General sued

US mortgage lender Fremont General has been sued by a retiree who claims its executives authorised the purchase of Fremont stock for company pension funds as they dumped their own shares.

The suit was filed in late April in the federal court in Los Angeles under the Employee Retirement Income Security Act.

Executives sold US$16.5 million ($19.9 million) of their own shares from January 1, 2003, to April 24, 2007, while causing the company's retirement plan to buy between US$150 million and US$210 million ($181 million-253 million) of the stock, the complaint said.

The suit seeks to recover millions of dollars in money lost when the share prices fell this year.

Boost for Siemens' pension

German industrial giant Siemens, which is undergoing management upheaval, said the deficit in its principal pension plans had fallen from €2.9 billion ($4.8 billion) to €1.7 billion ($2.8 billion) in the past year due to strong equity markets.

The company also announced chief executive Klaus Kleinfeld would leave in late April.

Mounties investigate themselves

Royal Canadian Mounted Police (RCMP) commissioner Bev Busson says she is committed to getting all the answers, while facing a parliamentary committee trying to get to the bottom of the Mounties' pension-fund scandal.

Busson is one of a string of key witnesses to appear before the public accounts committee, which is reviewing Auditor General Sheila Fraser's report - one of several investigations - into the management of the RCMP's pension fund.

In her report, Fraser found the fund was wracked with spending abuses, nepotism and money improperly diverted from the pension and insurance plans to cover costs that should have been paid out of the RCMP's budget.

Ciba dumps BlackRock for Insight

The UK pension fund of Swiss pharmaceuticals giant Ciba Speciality Chemicals has axed US-based BlackRock and awarded a £53.4 million ($128.6 million) fixed income mandate to UK asset manager Insight Investments.

Insight Investment, which is part of UK insurance and banking group HBOS, has £98.6 billion in assets under management.

Chairman of trustees Mark Wright said Insight was selected as it had a strong record for fixed income portfolio management.

The £400 million defined benefit scheme, with around 4500 members, was advised by Mercer Investment Consulting.

UK liabilities up £30b

UK private sector companies have added about £30 billion ($72 billion) to their pension liabilities in the past two years just by recognising the longer life expectancies of members, according to consultant KPMG.

The study, which looked at the published accounts of 195 companies over the past two years, found companies were building in expectations that the baby boomer generation would live, on average, one year longer than current retirees.

KPMG estimated every additional year of life expectancy added about £15 billion ($36 billion) to the UK private sector balance sheet.

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