Administration September 3, 2004

Ohio, Iowa Pension Funds Eye Wilshire Relationships

March 9, 2004 (PLANSPONSOR.com) - Two state pension funds are taking a long look at their consulting contracts with Wilshire Associates in the wake of investment advisory firm's recent management shakeup.

Reported by

Fred Schneyer

The moves by the $17-billion Iowa Public Employees’ Retirement System and the $9-billion Ohio Police & Fire Pension Fund follow previously announced reviews by the $161-billion California Public Employees Retirement System (CalPERS) and the $29-billion Massachusetts pension plan, according to a Los Angeles Times report.

Ohio decided to put its pension consulting contract out to bid after 23-year Wilshire veteran Stephen Nesbitt left last month as head of the firm’s consulting and asset management units, and two other consultants, Dennis Sugino and Kathy Barchick, headed for the exits late last month (See Nesbitt Exits Wilshire Associates ). The shakeup started February 6 when Wilshire Chairman Dennis Tito split Nesbitt’s duties and named Julia Bonafede as head of consulting.

Ohiohas asked Wilshire and other firms to submit bids by the end of March, said plan spokesman David Graham. Plan officials, who had a long-standing relationship with Sugino, “decided this was as good a time as any to see who else is out there,” Graham told the Times. Meanwhile, Iowa put Wilshire on its “watch list” effective February 9 and plan staff “will closely monitor the effect of these changes over the next year.”

CalPERS and Massachusetts began monitoring Wilshire after it disclosed in October that the US Securities and Exchange Commission (SEC) was investigating a complex “hedging” strategy the firm’s money management division had used involving futures contracts based on its popular Wilshire 5,000 stock market index (See SEC Examining Wilshire Mutual Fund Trades ). The SEC has brought no action, and an agency spokesman declined to comment on the probe.

In April, CalPERS’ board will review Wilshire’s management changes and determine whether the moves are acceptable to it, spokeswoman Patricia Macht said. Wilshire’s contract expires June 30, 2005, and CalPERS expects to request consulting bids this summer.

Massachusettshas retained Wilshire on a month-to-month basis since October, when it was poised to renew a long-term contract before news of the SEC probe broke, according to Bloomberg News. Wilshire, whose client assets total $2.5 trillion, said it does not expect the executive shuffle to hurt its consulting business.