Performance Qualms Cost MDL Another Client

June 10, 2005 (PLANSPONSOR.com) - A Pennsylvania public pension fund has fired a Pittsburgh-based money manager that had been running $22.3 million for the fund after charges the manager lost $120 million for an Ohio public client.

The Allegheny County Retirement Board decided unanimously to sever its relationship with MDL Capital Management Inc. amid reports MDL’s investments for the Ohio Bureau of Workers’ Compensation clipped the latter’s fund¬†from $335 million to $215 million through investment bets that long-term interest rates would rise, the Pittsburgh Tribune-Review reported.

The Pennsylvania fund’s board members said they were already concerned about MDL’s performance – concerns that were exacerbated by the Ohio news, the report said. “When anyone loses confidence in a manager, it’s difficult to get that back,” said board member and Allegheny County Treasurer John Weinstein, according to the Tribune-Review.

MDL also handles $459.8 million in investments for the Pennsylvania State Workers Insurance Fund, which provides workers’ compensation insurance for employers who can’t get it elsewhere. A three-member board comprising of state Treasurer Robert Casey Jr., Insurance Commissioner Diane Koken and Labor Secretary Stephen Schmerin oversees the fund. “Obviously, we’re checking to make sure that MDL did not exceed its authority and engage in any such investments in Pennsylvania,” Casey spokeswoman Karen Walsh told the newspaper.

MDL also is one of 13 managers the Pennsylvania State Employees Retirement Fund uses. The $91 million in state employee money under management with MDL is in government and corporate bonds and other “plain vanilla” investments, fund spokesman Robert Gentzel told the newspaper.

Financial advisors to the Allegheny County Retirement Board said local money invested with MDL was more conservatively managed than the cash lost in Ohio.

The MDL money will temporarily be managed by Mellon Financial Corp. until the board makes a long-term decision on how to invest it. The retirement board, which had total assets of $688.1 million as of April 30, has had as much as $27.4 million invested with MDL, the news report said.

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