Its sights set on the United States and Asia, South Korea's $30 billion sovereign wealth fund is hunting for equities. Korea Investment Corp. (KIC) doesn't see bonds outperforming stocks over the long term, which is what has prompted the move.

Once the reallocation is executed, equities will account for half of KIC's "traditional" investments. Today, it stands at 40%. High quality equities and fixed income securities comprise 90% of KIC's portfolio, with the rest, one would gather, consisting of "non-traditional" investments.

The same market meltdown that's trashing your 401(k) is also killing pension funds.

USA Today reports that "The nation's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008, holding only 79% of the assets needed to cover estimated long-term liabilities. That compares with an $86 billion surplus -- 109% of estimated liabilities -- at the end of 2007."

Another report suggests that pension funds lost another $54 billion in February. The Pension Benefit Guaranty Corp. already has an $11 billion deficit, making the situation all the more precarious.

The U.S. government is going to end up supporting some part of the pension plans of The Big Three. No one is saying that out loud, but it is likely nonetheless.

According to The Wall Street Journal, "The government agency that protects pensions for Americans is raising fresh concerns about the repercussions if one or more of the U.S. auto makers were to collapse, saying 1.3 million workers and retirees could see their pensions slashed if that were to happen." General Motors (NYSE: GM) probably will not fail, but Chrysler probably will. Its sales were down over 50% in December. It cannot stand many more months of that.

The pension obligations of Detroit are well above $40 billion.

The government could say "tough luck," but it won't in a deep recession. If the plans failed, those receiving pensions would move from being net consumers to people who might well need government financial assistance to finance their homes and daily living costs. With unemployment moving toward 8%, there are only so many people the government can directly support.

The Big Three pensions will be another example of the government left holding the check.

Douglas A. McIntyre is an editor at 247wallst.com.

Ford Motor Co. (NYSE: F) may cut additional 9,000 U.S. factory jobs via its latest buyout offer, sources told Bloomberg News Monday.

The cuts, on top of 33,600 union workers who left through buyouts / early retirement in 2006 and 2007, would speed Ford's return to profitability as it would replace them with new workers who would be paid half as much.

Ford's shares gained 5 cents to $6.13 in Monday morning trading on the news.

Necessary cuts

Independent stock analyst C. Leonard Bauer, formerly of Prudential, told BloggingStocks Monday the cuts are part of painful, but necessary changes Ford must make to survive.

"Ford has done a good job in the initial stages of it restructuring, closing useless plants, increasing efficiencies at existing assembly lines, and lowering legacy costs. But the really big savings will come from getting a lower-wage workforce in place," Bauer said. "Because of global competition, auto makers must reduce labor costs by about 30-50%, just to survive. This is another step in that process." Bauer added that he does not have a rating on the company, nor own Ford's shares.

Further, Bauer said he expects the cuts to speed Ford's return to profitability, arguing that if the U.S. recession is mild, or lasting two quarters or less, Ford will earn a profit in 2009. Bauer expects Ford to lose about 15 cents in 2008 and earn about 60 cents in 2009.

United Parcel Service Inc. (NYSE: UPS) plans to set up a pool of money that will be run by the Teamsters. The capital will become the new health fund for employees at the company. First, UPS will pull out of the Central States Pension Fund, which handles benefits for a number of trucking companies.

According to The Wall Street Journal (subscription required), "the move would shed an annual expense that reached $1.4 billion in 2006, up 14% from a year earlier." The plan is not unlike the one that General Motors Corp. (NYSE: GM) has negotiated with the UAW.

These deals are good for the companies, but are they good for the unions? They do often get job guarantees for their members as part of the contract. But, the new funds can lose value, and their ability to cover employee health care costs. Several years ago, a fund established for Caterpillar Inc. (NYSE: CAT) employees ran out of money.

Big labor may believe that it is doing a good job for it members who are in the workforce now. But, it may not be doing them any favors as they get older.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Ford (NYSE: F) and General Motors (NYSE: GM) have started telling the UAW that they are willing to move much of their production outside the U.S. if they cannot get very large concessions on employee costs.

According to The Observer in the UK, if negotiations do not go well, "Ford and GM negotiators have said the companies will have no choice but to move their North American operations to countries in Latin America and Asia."

Both car companies have been trying to set up a fund, run by the UAW, to handle most of the pension and health benefits for the UAW. This would have to be funded with as much as $60 billion from the two companies, but would take the liabilities for these costs off of their balance sheets.

But, the UAW may want a level of funding for this pool that is greater than the car companies are willing to give. Or, the UAW may want to fight for a higher number of jobs in the U.S. than GM and Ford feel they can handle. With falling vehicles sales and high costs, getting their North American operations profitable may be impossible no matter what the union gives.

All the UAW has to push back with is a strike. And, strike it may. If the UAW gives up what the car companies want in this round of negotiations, the union will cease to exist as the bargaining force that it has been for decades. The union may decide that it is better to risk dying while defending its workers that to be overrun without a struggle.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Everything's big in Texas. Look at the state's Teacher Retirement System (TRS). In all, it has about $112 billion in assets.

Interestingly enough, the pension fund wants to devote about a third of its assets to alternatives, such as hedge funds and private equity funds. This is according to a story in the Wall Street Journal [a paid service].

Yes, when you take a look a the SEC filings of the Blackstone Group (NYSE: BX), Fortress (NYSE: FIG), and KKR, you will see that alternative investment can post strong returns.

Despite this, the TRS strategy is certainly gutsy. Keep in mind that alternative investments can be fairly illiquid. What if it gets tougher to do IPOs or get sound exits on these investments?

Or, what if there is a meltdown, as seen with the subprime hedge funds at Bear Stearns (NYSE: BSC)?

Even the pros can make big blunders. And it could be bad news for pensioners.

On the other hand, TRS's move is certainly good news for the private equity world. Simply put, there's likely to be many more assets under management -- and that means lots of juicy fees.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Missouri's state treasurer, Sarah Steelman doesn't think pension funds should invest in companies doing business in terror-sponsoring nations. While her state has decided against agreeing to that,12 states have passed laws that in some way restrict pension funds from investing in companies with questionable practices. Here's the most interesting part about Steelman's campaign, from the Wall Street Journal:

Last summer, Ms. Steelman unveiled what she calls a "terror free" fund -- a small fund, intended as a model, designed to avoid investments in nations considered terror sponsors. In its first eight months of existence, her fund has returned 27%, she says. "People said fund performance was going to suffer. We've shown that's just not true."

While a strong track record over such a short period of time managing an amount of money far smaller than most pension funds isn't proof of anything, there is a substantial body of evidence to indicate that socially responsible investing and investment policies excluding companies with poor ethics do not inhibit returns. Consider the performance of Domini 400 Social Index: Since its inception in 1990, that index has averaged an annual return of 12.28% versus 11.71% for the S&P 500.

I like Ms. Steelman's idea, and public pension funds can make a powerful statement by divesting not just companies dealing with Iranian, but any company that is engaging in questionable business practices. I've seen no evidence that ethics inhibits returns. As Alan Greenspan once said "Material success is possible in this world and far more satisfying when it comes without exploiting others."

The Wall Street Journal is reporting that the private equity firm Cerberus has won the bidding for Chrysler. DaimlerChrysler (NYSE: DCX), which will probably change its name, will hold a small stake in the new holding company. Cerberus bought the majority of GMAC from General Motors (NYSE: GM) last year.

Aside from what Cerberus pays for the U.S. car company, which may be very little, the key to the transaction will be that Daimler will move the $18 billion of Chrysler pension and benefits obligations off of its books.

The UAW is bound to try to derail the deal. They favor having Daimler keep Chrysler or sell it to Canadian car parts company Magna International (NYSE: MGA). In either case, the union believed it could hold on to more jobs. The UAW may now be faced with trying to block the deal at the Daimler supervisory board level, or threaten to strike in the face of the deal. A work stoppage could badly damage Chrysler's already troubled efforts to turn around it sinking U.S. sales.

Cerberus may have the money, but the union holds most of the cards.

Douglas A. McIntyre is a partner at 24/7 Wall St.

For 16 years I worked directly with French and British portfolio managers advising them on their U.S. stock portfolios. I visited Paris and London on more than 225 separate trips during that period. My mother was born and raised in France, her father, a captain in the French army was killed in World War II. My own father was educated at a French medical school and I had the privilege of spending several summers as a youth in Southern France. Through all this, I learned to adore the country and in another, sense feel sorry for it.

The French way of life is truly embodied in the joie de vivre. The work ethic in France has always been "do your job, but no more," and forget overtime work -- its not the money, its the infringement on free time. A person starts a new job and is instantly granted 5-6 weeks of vacation. The French medical and pension system is among the most generous in the world. My own mother worked exactly for three months in a temporary agency in 1954, left for the United States with my dad, a newly minted physician. She became an American citizen, and yet when she turned 65, she was informed that she qualified for a French pension. She was flabbergasted to learn that the French government was depositing $175 per month in her American checking account . She did not earn a cumulative total of $175 in her three-month temp career! When she inquired she was told that "you are entitled! You were born here!" She felt so guilty that her monthly deposit was immediately given to charity.

The months of July and August are renown for the French vacance -- vacation. I dealt with portfolio managers that took five weeks off in a row, which is great work if you can get it, but no one backed up or watched their portfolios. I remember asking several of them what if there was an emergency on one of the stocks they held? The common response was, it will have to wait.

Memphis-based FedEx Corp. (NYSE:FDX) is not only the world's #1 express courier, but has been called a bellwether of the U.S. economy. So it will be interesting to see what happens when FedEx reports quarterly earnings on March 21.

• Did you know that FedEx once delivered a pair of giant pandas from Beijing, China, to Memphis, Tennessee?

According to Thomson Financial, the consensus estimate is for FedEx to announce Q3 2007 revenue of $8.7 billion, with earnings per share of $1.33. In the previous quarter, actual revenue was $8.9 billion, with EPS of $1.89. However, the early consensus estimate for Q4 2007 (the quarter ending in May) has EPS at $2.04.

The consensus recommendation for FedEx is buy (seven analysts say strong buy, six say buy, and seven say hold), with a price target of $125.15 (individual targets ranging from 100 to 144). Shares opened Wednesday at $112.20; the 52-week high was $121.42 in November, and the 52-week low was $97.79 in August.

• FedEx has the second largest fleet of planes in the world, and its planes are named after the children of employees.

On the minds of FedEx investors and watchers in these days leading up to the Q3 2007 report has to be the lackluster Q2 report back in December. Also, that FedEx announced recently a somewhat controversial plan to cap pensions, and that a judge has allowed a discrimination lawsuit brought by independent contractors to proceed.

This post is written as part of AOL Money & Finance's Best & Worst 2006. To vote for the money story of the year, go here.

Can the U.S. auto industry recover from a horrid 2006? Ford Motor Company (NYSE:F) and General Motors Corporation (NYSE:GM) had many really bad quarters this year in an attempt to turn their huge, globalized businesses around on a dime -- which is almost impossible with the sprawl both companies have.

Combine this with an out-of-date pension and health care liabilities that other global car makers don't have, plus the inability of both Ford and GM to properly anticipate the problem of rising gas prices (and the sales reduction in gas-hogging vehicles as a result) and -- voila! -- you have one of the more disastrous years on record for both automakers in recent history.

Ford is in the midst of giving 38,000 workers a severance package to leave the company after losing almost $6 billion in its latest quarter and is replacing its CEO. And GM, while not having that large of a perceived problem, is also in the midst of trying to re-engineer the huge liabilities it has for older worker costs (like health care for retired GM workers), while simultaneously trying to get stylish, reliable cars that people want to buy to the marketplace.

GM and Ford SUVs have rapidly fallen out of favor with the recent advent of sky-high gas prices, and although gas prices have come down quite a bit recently, that doesn't mean GM will start selling SUVs like hotcakes again -- and it can't think this way any longer.