The city of Pittsburgh put its troubled pension fund in the hands of a global investment consultant yesterday, one step in Mayor Luke Ravenstahl's three-part plan to stabilize the city's vulnerable retiree benefits pot.

Mercer Investment Consulting, part of financial giant Marsh & McLennan Companies, will replace Philadelphia firm Hirtle Callaghan & Co., which managed the city's pension money since 1995. An adviser hired by the city who helped pick Mercer said the firm had a solid plan to diversify the city's investments.

"Mercer was head-and-shoulders above the competition," said Girard Miller, an investing author and member of the Governmental Accounting Standards Board, hired by the city to interview 17 firms vying to handle the $348 million pension fund. "Their track record [with troubled funds] is stronger and deeper than anybody else in the country."

The city's pension board unanimously agreed.

The pension fund should contain $840 million to cover obligations to retirees and employees. It has been short for 20 years. The gap of nearly half-a-billion dollars leaves the city vulnerable should the stock market have a few bad years, Mr. Miller said.

"Progress has been made" under Hirtle Callaghan's management, he said. But the city's portfolio is too heavy on stocks. He said it should triple its stake in "alternative investments" like real estate, venture capital funds and private companies.

Mercer was the only contestant, besides Hirtle Callaghan, that presented a detailed plan for improving the city's pension investments, he said. The firm's fee, $240,000 a year for three years, is lower than the $312,000 Hirtle Callaghan got last year.

Three other national firms and Hirtle Callaghan were finalists for the job. None of the three local firms that submitted proposals made the finals.

Mercer will serve the city from its Atlanta office. The city will try to finalize its contract by Jan. 1.

Mr. Miller said good investments alone won't fix the city's fund. There also must be changes in how much money comes into and goes out of the fund.

Mr. Ravenstahl has said non-union hires will be offered the option of defined-contribution plans instead of pensions starting next year. He also has gathered mayors of distressed cities to seek a common, statewide solution to pension funding woes.