Six pension funds and endowments are undergoing significant investment management shifts.
The $3.9 billion School Employees Retirement System of Ohio, Columbus, is negotiating with four fixed-income money managers to assume the management of its $1.2 billion portfolio previously managed internally.
The $513 million Atlanta General Employees' Pension Fund completed its search for its first external fixed-income managers. Three managers were hired to manage the fund's approximately $300 million allocation to fixed income.
The $60 million University of Idaho endowment fund, Moscow, is considering a move toward external management, said Robert N. Steele, trust and investment officer. All but 4% of assets, run in international mutual funds and closed-end funds, are managed internally.
Conversely, the investment staff of the $16.5 billion Virginia Retirement Systems, Richmond, will soon propose that $500 million of externally managed fixed-income assets be brought in-house.
The $5.5 billion endowment of the University of Texas System, Austin, has restructured its custodial relationships, putting the oversight of its separate funds under one umbrella. It also terminated its emerging manager trust and targeted a new asset class, alternative liquid assets.
The $765 million Louisiana Education Quality Trust Fund, Baton Rouge, will be making its first move into equities.
Paul Kubinsky, chief investment officer of the Ohio School fund, said his fund has gradually reduced its fixed-income allocation and has decided to hire outside managers to get better performance.
Last year, the fund had 39% of its assets in fixed income; the goal is to bring it down to 28%.
Trustees have authorized the board to negotiate contracts with J.P. Morgan Investment Management and Sanford C. Bernstein & Co., both of New York; Western Asset Management, Pasadena, Calif.; and San Francisco-based Dodge & Cox.
Each manager will get about $300 million. No additional fixed-income hires are anticipated, said Mr. Kubinsky.
The Atlanta pension fund moved to external fixed-income management following several years of acrimony between investment officer Theresa Stanford, and Michael Bell, the city's chief financial officer.
Ms. Stanford managed the pension fund's $375 million fixed-income portfolio.
Atlanta Mayor Bill Campbell temporarily reassigned Ms. Stanford in June 1994 following Mr. Bell's call for an audit of 1993 fixed-income transactions performed by Ms. Stanford.
The audit documented a disproportionate number of trades with Atlanta-based broker/dealer Pryor, McClendon, Counts & Co. A subsequent report by the city's legal department determined that PMC & Co. brokered about 70% of the 1993 transactions.
The city attorney's report concluded that the trading with PMC & Co. created "a serious appearance of impropriety." The report said Ms. Stanford did not "consciously" direct investments to the company.
The city attorney recommended the city ask the U.S. attorney's office to investigate the trades with PMC.
A spokesman for the U.S. Attorney for the Northern District of Georgia, Atlanta, said he could not confirm or deny the existence of an investigation. But city officials confirm that an investigation has begun.
In contrast, the investment staff of the Virginia Retirement System would like to bring about $500 million of its fixed-income money inside, said Chief Investment Officer Irwin Will. "We think we can do a very good job at a very reasonable price," said Mr. Will.
At the University of Texas, the system named Mellon Trust, Pittsburgh, the sole custodian for its various funds, said Brian Borowski, endowment officer.
Texas previously had Texas Commerce/Chemical as custodian of its Permanent University Fund; NationsBank for its Long Term Fund; and Mellon for its Short Income Bond Fund.
"What we are trying to do is put everyone under one umbrella," said Mr. Borowski. "Everything is now reporting to one custodian."
The system also terminated Washington Hackett Poitevien & Co., New Orleans, as manager of a trust of emerging money managers. The money managers will continue their relationship with the University of Texas but will now report directly to the system's staff, said Mr. Borowski.
The money managers are San Francisco-based Apodaca-Johnston Capital Management; Davis Hamilton Jackson & Associates, Houston; Chicago-based Fortaleza Asset Management; and Pena Investment Advisors, Denver.
The decision to eliminate WHP was "budgetary," said Mr. Borowski. The University of Texas was the first client of WHP's emerging manager trust and allocated $105 million to it in March 1994.
The endowment also targeted a new allocation to "alternative liquid assets," said Mr. Borowski. The fund expects to place 10% of its total assets in the strategies over the next five years.
The strategies include hedge funds and commodity-type investments. Of the latter, it may consider investing in the Goldman Sachs Commodity Index as an alternative to managed futures.
At the Louisiana education fund, Tony Gelderman, chief of staff for Louisiana Treasurer Mary L. Landrieu, said the fund is invested solely in fixed income. Recent legislation allows the fund to move up to 35% of total assets into equities. Plans are to move 5% to 7% of assets into equities each year.
Its first step is a search for an indexed equity manager. Once that's done, fund officials will seek a consultant for an asset allocation study and help develop investment policies, he said.