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July 21, 1997 01:00 AM

CONTRA COSTA MOVES $61 MILLION TO BONDS

Phil Levine
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    An overheated stock market, resulting in an overweighted equity portfolio, has pushed the Contra Costa County Employees Retirement Association to rebalance, moving $61 million out of equities and into fixed income.

    The move comes as part of the $2 billion retirement association's just-completed asset allocation study. "Our board reviewed our portfolio, and we felt it was too overly weighted on equities, primarily due to the strength of the stock market in the last little while," said Patricia Wiegert, Contra Costa retirement administrator. "We felt we had to rebalance our portfolio to try and get closer to our target allocation."

    In reviewing its asset allocation, Contra Costa decided to move $13.25 million away from each of four domestic equity managers to existing fixed-income managers.

    The four are Alliance Capital Management, San Francisco; Hanson Investment Management Co., San Rafael, Calif.; Wentworth Hauser and Violich, San Francisco; and Boston Partners Asset Management L.P., Boston. None of the managers is being terminated. The board also decided to move $8 million in international equity from Capital Guardian Trust Co., Los Angeles, leaving about $134 million in assets with the manager.

    The movement of funds out of equities will result in $20 million going to a "fixed-income strategy" with Barclays Global Investors, San Francisco; $5 million to an intermediate mortgage portfolio with Scudder, Stevens & Clark, New York; and $23 million to Scudder's active fixed income fund. An additional $3 million has also been allocated to the AFL-CIO Housing Investment Trust, Washington. On the international side, Contra Costa is moving the $8 million from Capital Guardian to fixed income at Brinson Partners Inc., Chicago. Scudder now manages a total of $388 million for the county, while Barclays manages about $290 million and AFL-CIO Housing, approximately $22 million.

    One divergent move by the retirement board was a $2 million increase in its small-cap equity portfolio with Chancellor LGT Asset Management Inc., New York, boosting their managed assets to approximately $55 million. Ms. Wiegert explained this move was due to the board's "sense that we were underweighted on the small-cap side of things, and felt we wanted to increase our holdings in that regard."

    The new targets for asset allocation established by Contra Costa's board differ only slightly from previous targets. Domestic equities have decreased to 42% from 43%, while the target for international equity has increased to 10% from 9%. Domestic fixed income will at 32%, and international fixed income will remain at 3%. Contra Costa is decreasing its real estate allocation to a target of 7% from 9%. The fund also is increasing its alternative investment allocation to 5% from 3%; cash remains constant at 1%. Contra Costa's board also decided to place fund manager Scudder, Stevens & Clark, New York, "on review" for the next six months.

    "We're not doing this because of any performance problems, as witnessed by the fact that we're allocating some of our fixed-income changes to Scudder," explained Ms. Wiegert. "We're actually quite happy with Scudder. The sole reason for this move is due to Scudder's purchase by the Zurich Group."

    Ms. Wiegert added fund officials don't expect another asset allocation review until 2000, however "we may have to do some more shifting if we find we are over-target on the equity side. A lot will depend on what happens in the market over the next few quarters."

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