Oregon 457 plan adds real return option

Updated with correction

Oregon Investment Council, Tigard, added a real return investment option and switched some equity managers for the state's $1.6 billion 457 plan, said Michael Cox, spokesman, in an e-mail.

The new real return option will blend three strategies — the GMO Benchmark-Free Allocation, Wellington Real Total Return and SSgA Real Asset funds — that invest in a combination of inflation-linked bonds, absolute return, commodities, real estate investment trusts and equities. The managers are GMO, Wellington Management and State Street Global Advisors.

The council also added three managers to the 457 plan that are managers for the $70 billion Oregon Public Employees Retirement Fund, Salem, which the board oversees. They are AQR Capital Management, Dimensional Fund Advisors and Lazard Asset Management.

As a result, the plan's $239 million small/midcap stock option was renamed the “small company stock option,” and three funds were eliminated — American Beacon Small Cap Value, Columbia Acorn and T. Rowe Price Institutional Mid-Cap.

The investment management will be split 30% BlackRock (BLK) Russell 2000 Index Fund and 35% each DFA U.S. Small Cap Portfolio and Callan Small Equity Index Fund. The benchmark was changed to the Russell 2000 from Russell 2500, and the option no longer contains midcap stocks.

The fund's $109 million international equity option eliminated the Artisan International Fund, the Marsico International Opportunities Fund, the GMO Foreign Fund-Class III, the Oakmark International Fund and the BlackRock MSCI EAFE Index Fund.

Investment management of the international equity option now will consist of Lazard International Equity for 25%, AQR International Equity Fund for 25%, BlackRock MSCI ACWI ex-U.S. for 25%, DFA International Core Equity for 15% and DFA Emerging Market Core Equity for 10%.

Also, actively managed funds in the $142 million Large Company Value Stock Option and the $153 million Large Company Growth Stock Option were eliminated. Assets in both options will be invested solely in BlackRock Russell 1000 funds. Before, BlackRock managed 40% of each fund.

Funds eliminated in the large-cap value move were Dodge & Cox Stock Fund, MFS Value Fund and LSV Value Equity. Funds eliminated in the large-cap growth move were American Funds Amcap, Wells Fargo Advantage Endeavor and Delaware U.S. Growth Fund.

In the $93 million intermediate fixed-income option, DoubleLine Total Return Bond Fund replaced Fidelity Broad Market Duration Fund for one-third of the assets. The BlackRock U.S. Debt Index Fund and Wellington Trust Core Bond Plus each will continue to get one-third of the assets.

The council extended Arnerich Massena's consulting contract through August 2016. It also relaxed the restrictions on a Schwab self-directed brokerage option to allow all U.S.-traded exchange traded funds, listed common stocks and corporate bonds and reduced the required minimum balance to open a self-directed brokerage to $10,000 from $20,000.