Jul. 4--U.S. Bancorp and Weyerhaeuser try unconventional approaches with their pension money and get burned

Most investment gurus recommend balancing retirement savings invested in volatile stocks with stable bonds or cash.

That's not what U.S. Bancorp does. The Minneapolis-based bank, Oregon's largest by market share, put 100 percent of its $2.9 billion employee pension plan in stocklike investments, its annual report showed.

The result: The plan plunged from being 50 percent overfunded at the start of 2008 to 19 percent underfunded by the end -- a $1.4 billion loss.

Weyerhaeuser Co. doesn't adhere to convention either. It had 86 percent of its $6.9 billion pension in hedge funds and private equity. The Federal Way, Wash.-based forest products company once boasted to workers that its strategy returned a stunning 17 percent a year.

Last year, the plan lost 40 percent, or $2.7 billion, of its value. It went from being 40 percent overfunded to 7 percent underfunded. In April, the company suspended its 401(k) match.

Both illustrate the risks of aggressively investing worker retirement funds. Most companies plug between one-half and two-thirds of their assets in stocks or equities. They put far less -- 4 percent to 7 percent -- in hedge funds and private equity.

"It's unlike other pension funds I've seen, that's for sure," said Diane DelGuirco about Weyerhaeuser. DelGuirco is a University of Oregon associate finance professor who has studied pension accounting.

Weyerhaeuser spokesman Bruce Amundson declined comment. U.S. Bank spokeswoman Teri Charest, when questioned about the bank's investment allocation, referred to the company's annual report. In it, the company said that while investing in bonds might lead to less volatility, it also "limits the pension plan's long-term up-side potential." So, the bank's compensation committee based its all-equity strategy on its plans' "investment horizon and the financial viability of the company to meet its funding objectives."

More corporate pensions, lured by high returns, have dabbled in hedge funds and private equity but none to the extent of Weyerhaeuser. Such alternative investments pose different risks from stocks and bonds because they often require long-term commitments and their exotic holdings can be hard to value.

"Just by their definition, they're not transparent," said Jennifer Koski, a finance professor at the University of Washington. "You can't know what's going on inside of them. So when you invest in a hedge fund, you basically end up investing in the manager. To me that raises red flags.