INDEPENDENCE, Ohio - The $400 million Centerior Energy Corp. pension fund, is taking a more aggressive investment posture, moving to 25% in international and 70% of its total assets in equities, said Gregory A. Tropf, senior investment analyst.
The fund's major restructuring involved hiring eight managers and changing the assignment of another manager.
It dropped three managers, including one running a large-capitalization active portfolio, in favor of allocating more to indexing and enhanced indexing.
Five other managers were retained.
"This is a higher risk strategy," Mr. Tropf said of the restructuring. "But we are increasing diversification across the equity spectrum" - both domestically and internationally - "to minimize the risk."
The fund had a 50% allocation to equities.
In international, the fund will increase its allocation to 25% of total assets from 20% and enter three new segments of the market - value, small-capitalization and emerging markets.
Dimensional Fund Advisors Inc., Santa Monica, Calif., and Boston International Advisors Inc., Boston, will manage value portfolios of stocks in the Morgan Stanley Capital International Europe Australasia Far East Index.
For small-cap EAFE stocks, it hired Morgan Grenfell Asset Management Ltd., London, and Pictet International Management Ltd., London.
Pictet and Genesis Asset Managers Ltd., London, will manage emerging markets portfolios.
For an active broad EAFE mandate, it retained existing manager Morgan Stanley Asset Management Inc., New York.
Some 60% of the international allocation will go to the broad EAFE mandate, 20% to international small-cap and 20% to emerging markets.
The fund dropped Templeton Worldwide Inc., Fort Lauderdale, Fla., a global manager, because the fund wanted a pure international manager, Mr. Tropf said.
In domestic equities, the fund increased its allocation to small-cap stocks to $45 million from $25 million.
It hired DFA for small-cap value and Nicholas-Applegate Capital Management, San Diego, for small-cap growth. Investment Advisers Inc., Minneapolis, was hired for midcap growth.
It dropped Quest Advisory Corp., New York, which ran $25 million and had been the fund's only small-cap manager.
In large-cap equities, the fund moved more to enhanced indexing and passive management, allocating $90 million to the area.
"We think large-cap management is fairly efficient," Mr. Tropf said, offering little opportunity to add value through active management.
The fund hired Society Asset Management Inc., Cleveland, to manage a Standard & Poor's 500 index fund.
It boosted the existing enhanced S&P 500 assignment of Independence Investment Associates, Boston, giving it more money.
It changed the assignment of BZW Barclays Global, San Francisco, to an enhanced S&P 500 portfolio from a BARRA/S&P 500 growth sector fund.
It retained Stein Roe & Farnham Inc., Chicago, for large-cap, growth at a reasonable price.
It dropped Jundt Associates Inc., Minneapolis, which had $30 million in diversified equities.
Amounts of all of the assignments weren't available. The allocations were split unevenly among the managers in each sector, Mr. Tropf said.
Funding came from the terminated managers and from reducing fixed income.
In active core bond management, the fund reduced Pacific Investment Management Co., Newport Beach, Calif., and Miller Anderson & Sherrerd L.L.P., West Conshohocken, Pa., to $40 million each from $50 million.
It also retained some $65 million in guaranteed investment contracts.
The fund is considering adding a market-neutral allocation, Mr. Tropf said.
Officials are renewing their interest in the area after deciding not to make market neutral part of the major asset allocation and money manager restructuring.
"With all the changes to the fund, we didn't want to try to have to convince everyone on the (pension) committee that this is the right thing to do."
Fund executives plan to study the area, although there has no definite timetable for a search.
Summit Strategies, which assisted with the restructuring, is helping with the new study.