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Iowa system seeks TIPS managers

Iowa Public Employees’ Retirement System, Des Moines, issued an RFP for managers to invest a total of $600 million in Treasury inflation-protected securities for the $19.7 billion system.
The RFP, which is available at www.ipers.org, says more than one manager could be hired for the allocation. Managers would invest at least 70% of the portfolio in U.S. TIPS and outperform a predetermined benchmark through active or passive strategies, according to the RFP.
The funding source wasn’t immediately available.
Proposals are due Feb. 22. The IPERS investment board is scheduled to make a decision June 24, the RFP stated.
Wilshire Associates is assisting.

Dutch fund on look out hedge fund managers

Pensioenfonds Zorg en Welzijn, Zeist, Netherlands, is searching for direct hedge fund managers to run about €1.2 billion ($1.6 billion) combined, said Fons Lute, managing director alternative strategies at PGGM, which manages the €87 billion fund.
PGGM will terminate all of its hedge fund-of-funds managers, which currently run about two-thirds of the fund’s €1.7 billion hedge fund portfolio, because together they gave the fund excess overlapping beta exposure, Mr. Lute said. He would not name the managers.
PGGM will instead invest directly in hedge funds and handle risk management internally.
The new portfolio will have limited exposure to market-neutral and long/short equity strategies, and PGGM will not invest in fixed-income arbitrage or merger-arbitrage strategies.
Mr. Lute said the transition to direct hedge funds will be mostly complete by the end of 2010.

Illinois Universities eyes proxy-voting consultant

Illinois State Universities Retirement System, Champaign, plans to search in June for a proxy-voting consultant, said Daniel L. Allen, chief investment offer of the $12.45 billion system.
Mr. Allen said he plans to ask the board in June to authorize the search to comply with a state law requiring searches for consultants at least every five years.
The search, if approved, would be undertaken in June with the board expected to make a decision on hiring in September, Mr. Allen said. The RFP would include both international and domestic proxy-voting advisory services, Mr. Allen said. Whether the fund hires one firm for each job or a single firm will depend in part on the proposal, Mr. Allen said.
Incumbent Marco Consulting Group, which will be asked to rebid, handles only domestic proxy voting, Mr. Allen said. Marco’s contract, which expired Dec. 31, was extended to Sept. 30.
The system now has its international managers vote their proxies.
Mr. Allen said the staff plans to consider having international proxy-voting advisory services outsourced, although trustees would have to make the decision.

News

Illinois Teachers gets $1.22 billion boost from state

Illinois Teachers’ Retirement System, Springfield, received a $1.22 billion contribution from the state, part of the proceeds of a $3.466 billion pension obligation bond sale, said Stan Rupnik, acting executive director and chief investment officer of the $30 billion fund.
About $250 million of the POB funds was invested with existing fixed-income managers; $400 million went to existing real-return managers; and $571 million was set aside for benefit payments over the next few months, Mr. Rupnik said.

Turnover tops targets for 2 of 3 active long-only managers

Turnover for nearly two-thirds of active long-only institutional equity managers exceeded their stated targets, according to a report conducted by Mercer and funded by the Investor Responsibility Research Center Institute.
In an interview, Jon Lukomnik, the institute's program director, said that pervasively high level of turnover points to a “systemic problem” for an industry focused on long-term trends.
The study of managers from June 2006 through June 2009 showed 550 of the 822 strategies whose managers provided expected turnover figures had actual turnover that exceeded those targets by an average of 26%. For the entire sample of 991 strategies, average annual turnover was 72%.
A fifth of the strategies had turnover of more than 100% annually.
The historic volatility seen during 2008 and 2009 shouldn't undermine the study's conclusion that “short term-ism” is a problem meriting attention, as turnover during the second half of the period wasn't appreciably higher than during the first half, before the worst of the convulsions in financial markets, said Mr. Lukomnik.
The study's scope didn't extend to mining data to show how the relative performance of higher turnover strategies compared with that of lower turnover strategies.

State Street fund universe gains 3.1% in Q4, 19.4% in 2009

The median return in the State Street Universe rose 3.1% in the fourth quarter and 19.4% in 2009, confirmed State Street spokeswoman Alicia Curran Sweeney.
The year-over-year increase follows a 24% loss in 2008.
The universe, made up of a diverse range of North American-based funds under custody by State Street and the Independent Consultants Cooperative, includes corporate and public defined benefit pension plans, endowments and foundations, Taft-Hartley defined benefit plans and master trust funds.
Endowments and foundations had the best performance in 2009, returning 21.3%. Taft Hartley funds had the lowest returns, 18.4%, though public funds, with a median return of 18.5%, were not far behind. Corporate pension plans returned a median 21% for the year.
Also, the report found that master trusts with less that $1 billion in assets outperformed those with more than $1 billion in 2009, returning 19.8% versus 17.6%.
Paula Gehr, vice president of State Street Investment Analytics, said the smaller funds are likely invested in more traditional investments than larger funds.
“(The smaller funds) are less in real estate and private equity and so on, so they probably have a little less exposure than (larger funds),” she said.
Median returns for various asset classes varied greatly in 2009, with emerging markets funds having the highest returns at 77% and real estate funds the lowest at -28.8%. Developed markets had the second highest returns for the 12 months ended Dec. 31 at 33.4%, followed by global equity, 32.5%; U.S. equity, 30.1%; global fixed income, 17.8%; U.S. fixed income, 11.8%; private equity, -5.7%; and venture capital, -8.1%.
“The returns evidenced by the State Street Universe mirror and reinforce the perception of a general market improvement,” William Pryor, senior vice president and head of State Street Investment Analytics, said in a news release. “Whether that improvement will carry on or not into 2010 no one can predict; however, we are entering the year with positive momentum which is a distinguished difference from the market tone at the end of 2008.”

People

Strabo to lead global emerging markets at Rogge

Henrik Strabo joined Rogge Capital Management as portfolio manager and director of global emerging markets for the international equity hedge fund, confirmed Chico Korth, Rogge Capital’s chief operating officer. The position is new.
“I have known Henrik for close to 20 years, and I am particularly pleased that he has chosen to join our firm in Austin (Texas). His experience in international equity investing will help round out our investment team,” Paul Rogge, managing partner and founder, said in a news release.
Mr. Strabo was chief investment officer at international equity manager Clay Finlay, until its closure last year.