Fresno picks 3 to run $255 million total, plans equity searches

Fresno (Calif.) City Retirement Systems hired three managers to run a combined $255 million, confirmed Stanley McDivitt, retirement administrator.

The retirement systems' two pension funds — with a combined $2.4 billion in assets — hired Pacific Investment Management Co. to run $93 million in its unconstrained bond strategy as part of the fund's new absolute-return bond allocation. It also hired GMO and Newton Capital Management to run $81 million each in global tactical asset allocation strategies.

Both asset classes are first-time additions to the pension fund. Funding comes from rebalancing from fixed-income managers; no managers were terminated.

GAM and Standish Mellon Asset Management were also finalists for the absolute-return allocation and PIMCO, for GTAA. Investment consultant NEPC conducted the invite-only searches.

Separately, the retirement systems approved conducting invite-only searches for international equity and emerging markets equity managers to potentially replace existing managers. The exact asset sizes have not been determined yet, Mr. McDivitt said.

The board has elected to drop EAFE strategies, which do not include emerging markets exposure, from its international equity portfolio. Baillie Gifford and BlackRock (BLK) will continue to manage combined about 12.5% of total assets in international equity strategies. EAFE managers Pyramis Global Advisors and Principal Global Equities manage $170 million and $174 million, respectively, and will be considered in the search.

The pension fund is also conducting due diligence on ACWI ex-U.S. strategies managed by Capital Group, EARNEST Partners, Herndon Capital Management, Lazard Asset Management, LSV Asset Management, Select Equity Group and Thornburg Investment Management.

In emerging markets equity, incumbent managers Batterymarch Financial Management and Wellington Management run about $44 million each and will be considered in the search. The Batterymarch strategy was previously placed on watch.

The other managers under due diligence consist of Acadian Asset Management, Capital Guardian, City of London Investment Management, Dimensional Fund Advisors, Eaton Vance (EV) Management (EV), Mondrian Investment Partners, Neuberger Berman, Polunin Capital Partners and Schroder Investment Management.

Mr. McDivitt anticipates the whole process will take about five or six months.