Promark no longer will be courting non-affiliated clients

By Douglas Appell; Pensions & Investments ~ Aug 09, 2010

Promark Global Advisors, the name General Motors Asset Management took on in March 2009 to better pursue external clients, has gone into reverse.

Promark executives have made a strategic decision to “exit the pension plan management and outsourcing business it currently provides to non-affiliated clients,” confirmed spokeswoman Noreen Pratscher.

In line with that decision, the name of the New York-based money management unit will revert to GM Asset Management, effective Sept. 1. “We believe that this name, which is already established and known in the industry, best fits the identity and focus of the organization going forward,” said Ms. Pratscher.

Industry sources said the decision to exit the outsourcing business came after the parent company rejected requests from Promark's management team, led by then-CEO Nancy Everett, to allow a buyout of the money management unit, as the best means of providing greater incentives for the team to build the business.

Ms. Pratscher declined to comment. Reached by telephone, Ms. Everett declined to comment.

Ms. Everett left in June, after turning over her CEO duties on May 1 to Walter Borst, who left his job as General Motors Co.'s treasurer to take the position.

Ms. Pratscher declined to provide details on how much external client money Promark manages, or say what proportion of that money comes from total pension outsourcing clients as opposed to clients tapping the firm to manage specific strategies.

Promark's latest filing with the Securities and Exchange Commission, signed by Mr. Borst on May 26, showed the company managing $132.7 billion in client assets, with discretionary authority over $124.6 billion.

GM's retirement plan assets, meanwhile, stood at $99.2 billion as of Sept. 30, 2009, for Pensions & Investments' most recent survey of top U.S. pension funds. Assuming GM's retirement assets have gained another $5 billion in value since then, Promark would be managing more than $25 billion in assets for external clients.

Ms. Pratscher said the company's external outsourcing clients, which she wouldn't name, will be moved to new managers over the coming months.

Xerox terminates

Xerox Corp., Norwalk, Conn., with more than $7 billion in employee benefit assets, was Promark's most prominent non-affiliated client. In an e-mailed response to questions, Carol A. McFate, chief investment officer, said: “We have terminated our total outsourcing relationship, which phased out over time.”

With Xerox executives concluding that “our in-house capabilities were sufficient to handle the retirement plans,” the arrangement with Promark was ended long before GM officials decided in April to quit the outsourcing business, said Ms. McFate.

“We are now managing the investment managers directly,” she added.

Promark also oversees the $2.6 billion defined contribution portfolio of former GM affiliate Delphi Corp., Troy, Mich., as well as a big chunk for another firm with links to GM, El Segundo, Calif.-based DIRECTV Group Inc., with $1.7 billion in total retirement plan assets.

Al VanDenBergh, Delphi's director of corporate finance, capital markets, cash management and bank relations, didn't respond to calls seeking comment.

Dona Helle, senior manager of retirement programs at DIRECTV, couldn't immediately be reached for comment.

When the name change to Promark occurred in March 2009, a GM news release said Promark, in addition to managing pension plans, would also provide “investment management for specific mandates, most notably alternative investments such as real estate and absolute-return strategies.”

Ms. Pratscher said while Promark will not take on new clients, it will continue to manage existing mandates from non-GM clients in those alternative asset classes.

According to P&I's money manager survey for the year ended Dec. 31, 2008, Promark was internally managing $3.63 billion in absolute-return strategies and $4.63 billion in equity real estate.

Officials at the $85 billion New Jersey Division of Investment and the $1.2 billion Teamster Pension Trust Fund, Philadelphia & Vicinity, said Promark has told them the firm would continue to manage real estate mandates for them.

Andrew Platt, a spokesman for the New Jersey Treasury, said while Promark has indicated it will continue to offer its services to existing clients, the Division of Investment is awaiting a “formal letter that confirms all the details.”

New Jersey had committed a total of $650 million to real estate investments with Promark, of which $314 million had been invested as of June 30 in three real estate portfolios.

William J. Einhorn, administrator of the Philadelphia Teamsters' fund, declined to give the size of Promark's mandate.

Moving on

Other clients say they have moved on. For example, Sherwin-Williams Co., Cleveland, “did move our (small-cap value equity) account” to a new manager, said Mike Conway, director-corporate communications and investor relations. He declined to provide details. Sherwin-Williams has more than $3.1 billion in defined benefit and defined contribution assets.

Among other senior executives, Tony D. Kao, Promark's chief investment officer, retired at the end of July, Ms. Pratscher confirmed. She said Mr. Borst has taken on Mr. Kao's responsibilities as well.

Mr. Borst didn't respond to an interview request.

Michael E. Klehm, Promark's president, COO, CFO and treasurer, couldn't immediately be reached for comment about what Promark's decision to focus again on GM-related assets would mean for the firm's sales and client service personnel.

Asked if GM officials might choose to dismantle the investment unit and outsource, Ms. Pratscher said: “At present there is no intention to make significant changes to the team or to outsource the management of GM's pension assets.

Contact Douglas Appell at [email protected]