SC Holds On To AllianceBernstein

December 16, 2003 ( - Another state has decided to not throw in the towel on its pension asset management relationship with AllianceBernstein.

Investment officials for South Carolina have decided to retain the investment firm as manager for a $715.9-million large cap growth fund for the state, and a $489-million large cap value fund.   The decision comes despite allegations against Alliance Capital Management in the widening mutual-fund probe, according to a Dow Jones report.

South Carolina officials were apparently undeterred by the allegations surrounding the firm, instead focusing on the returns of both portfolios AllianceBernstein manages for the state.   According to Michael Sponhour , a spokesman for the Control Board, which is the trustee of the state’s $21-billion pension plan, both portfolios are up about 20% for the year.

In addition, an investment panel appointed by the South Carolina Budget and Control Board met with executives for the firm last week, and came away confident in their relationship with AllianceBernstein.   “Alliance spent a long time with us discussing the firm’s situation and changes they’ve made in response to these allegations,” Sponhour told Dow Jones. “The investment panel didn’t feel this was the time to recommend making a change.”

The move by South Carolina mirrors a move by North Carolina last week.   Investment officials in the Tar Heel state determined that Alliance Capital Management has “properly managed and monitored” the state’s assets in an initial review undertaken after regulators charged the firm in a widening mutual-fund probe (See  Alliance Passes First Tar Heel State Review ).

Other states also are reviewing their business relationships with Alliance as a result of the probe. Oregon investment officials will meet with Alliance Chief Executive Lewis Sanders this week to discuss the fund probe and issues related to it, according to Ronald Schmitz, director of investments for the Oregon State Treasury.   Oregon put Alliance on a watch list last month because of the probe, Schmitz said. The firm manages about $3.3 billion for the state’s $40 billion retirement system.

And the Indiana State Teachers’ Retirement Fund has intensified its monitoring of the firm, according to Bob Newland, chief investment officer of the fund.Alliance manages a $1.5 billion fixed-income portfolio and a $400 million international equity index for the Indiana teachers fund. Indiana recently fired Putnam Investments, a Boston firm that managed about $60 million for the teachers’ fund. Putnam has also been implicated in the mutual-fund probe.