Deals & People February 1, 2011

Commonfund Names New CIO

Commonfund appointed Rick Nelson as Chief Investment Officer of Commonfund Group and CEO of Commonfund Asset Management Company, effective February 1, 2011.
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In this role, Nelson will report directly to Verne O. Sedlacek, President and CEO of Commonfund Group.He will also chair the Commonfund Investment Policy and Asset Allocation Committee, oversee Commonfund’s equity and fixed income programs, and manage its $11-billion outsourced solutions business.  

Before joining Commonfund, Nelson was Vice Chairman and Chief Investment Officer of ING Investment Management Americas, where he led more than 300 professionals managing over $165 billion in assets, according to the company’s announcement.  He also worked as Managing Director, Head of U.S. Equity, for JP Morgan Investment Management, where he led 120 professionals managing over $90 billion in assets.  Prior to his role at JP Morgan, Nelson was with Bankers Trust Company as Managing Director and Head of the Quantitative Investments Group.

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Nelson earned an M.B.A. from the University of Chicago and a B.S. in Business from the University of Pennsylvania, Wharton School of Business.  

Commonfund also announced that A. Nicholas De Monico, who served as Deputy CIO during the search for a permanent one, has been named CEO of Commonfund Marketable Alternatives (a division of Commonfund Asset Management Company), reporting to Sedlacek.  In this role, De Monico will have investment and business leadership for Commonfund’s hedge fund portfolios, including funds and separate accounts in directional and relative value strategies.   

Commonfund Chief Economist Michael Strauss, will also assume the title of Chief Investment Strategist of Commonfund Asset Management Company, reporting directly to Nelson.  Susan Carter will remain President and CEO of Commonfund Capital, reporting to Sedlacek. 

Compliance February 1, 2011

7th Circuit Stock-Drop Rulings Seen as Helping Employers

A federal appellate court recently issued two rulings in stock-drop cases that may play a critical role for future employer-defendants.
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The Seyfarth Shaw law firm issued a memo saying the stock-drop rulings by the 7th U.S. Circuit Court of Appeals “severely undermine plaintiffs’ ability to challenge fiduciary decisions related to 401(k) plans on a class-wide basis.”

The firm was referring to the cases of Howell v. Motorola, Inc. (Case No. 07-3837) and Lingis v. Dorazil (Case No. 09-2796). In these cases, the court concluded that the Employment Retirement Income Security Act (ERISA) safe harbor shielded fiduciaries from claims that the defendants failed to disclose sufficient information about an allegedly bad business transaction and that certain defendants failed to monitor the conduct of fiduciaries they had appointed. The court also determined that the fiduciaries did not violate ERISA’s duty of prudence by including the Motorola Stock Fund as an investment option in the 401(k) plan, because Motorola stock never performed so poorly as to make it an imprudent investment option.

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The court found that Section 404(c) safe harbor was a defense to plaintiffs’ nondisclosure and monitoring claims. The court rejected plaintiffs’ arguments that the safe harbor did not apply because the plan had provided insufficient information, concluding instead that the plan provided detailed disclosures about the risk associated with investments and the defendants never intentionally misled participants. According to the court, “there is no support for the view that Plan fiduciaries were required to provide all information about Motorola’s business decisions in real time to Plan participants.”

The Court concluded that the 404(c) safe harbor applied to the failure to monitor claim with equal force. And even if the 404(c) safe harbor did not apply to the failure to monitor claim, the Court rejected the plaintiffs’ suggested standard for monitoring, which seemingly would require “every appointing Board member to review all business decisions of Plan administrators.”

The law firm memo is at http://www.seyfarth.com/MA13111/.

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