Wells Real Estate, which was expected to manage funds for Luzerne County until 2008, will return $12.8 million to the pension fund. In return, the Luzerne board will drop charges against the firm, according to the Wilkes Barre Times-Leader. The board now hopes to invest the money with other managers in hopes of garnering better returns, stating that the overall goal for the fund is 7.5% annualized returns. Currently, the fund’s average year-to-date return sits at 4.68%.
The fund’s advisor, Merrill Lynch, will do an asset allocation study in order to see if there are ways to increase returns will little or no risk. Currently, allocation for the pension fund sits at 60% stocks, 40% bonds. Luzerne employs 18 managers, most of whom are beating targeted benchmarks, according to the Leader. The board has recently fired two managers for not performing relative to their benchmarks.
The Luzerne board has recently put Emerald Advisors on notice that it will be watched closely due to low returns. The board told the investment management firm that they will be watched over the next two months in order to decide on whether to terminate them. ICM Asset Management and Westcap Advisors will likely be called in for reviews in December due to low returns, according the Leader.
The suit charges violation of federal civil racketeering influenced and corrupt organizations (RICO) violations and alleges Majority Retirement Board members and 24 former pension consultants or money managers were paid excessive fees and commissions from the pension fund in exchange for donations for political reelection campaigns (See PA Country Seeks Halt To Pension Funds Used for Legal Fees) . The Luzerne lawsuit has hit some bumps in the road however, with a judge ruling in February that the pension fund’s money could not be used to pay legal fees in the suit (See Luzerne County To Decide Fate of Federal Lawsuit By Friday ).