SACRAMENTO, Calif. - Fifty-eight money managers made the first cut in the $118 billion California Public Employees' Retirement System search for the very best domestic equity money managers, regardless of investment styles.
Sixty-five investment strategies or proposals were picked, with five of the 58 managers picked for multiple strategies. In all, 189 managers submitted 269 proposals.
Denver Investment Advisors L.L.C., Denver, with a midcapitalization growth strategy, and Brinson Partners Inc., Chicago, with a broad combination, core/blend strategy, received the very highest quantitative scores. Both management firms received 84 out of a possible 100 points in the ranking.
If the board of trustees Aug. 18 approves the staff recommendation to accept the quantitative ranking, as expected, the managers making the first cut will be scored again, on a qualitative basis.
In the new scoring, the fees the managers propose will count for 50% of their score.
The ranking was done by CalPERS staff members. Some of the very largest money managers in assets under management were given the highest quantitative ratings.
But the best a small and emerging money manager - identified as having less than $500 million in assets - could do in the quantitative competition was to reach 13th in the ranking. Marque Millennium had a score of 69 for its large-cap value strategy.
The lowest score to make the cutoff was 63, which was given to several managers with varying styles.
This first CalPERS ranking was strictly quantitative, based on factors such as positive alpha scores. A high alpha score indicates a manager's effectiveness in selecting underpriced securities.
To encourage manager participation, CalPERS is offering more generous performance-based fees to managers who make the final cut compared with previous years. The higher fees are similar to what some corporate pension funds pay.
Another difference in this search is that most large pension funds seek managers in a rigid investment structure. But CalPERS officials decided to seek what they called the best of the best of domestic equity managers, whatever their investment style. Investment style gaps that result will be filled with tailored, passively managed funds.
About getting the top ranking, Dennis E. Larkin, a vice president with Denver Investment Advisors, said, "We're delighted to hear that. Tell me more." Mr. Larkin said he hopes to do as well in the CalPERS qualitative and fee proposal manager rankings that will follow.
At Brinson Partners, Gary Fencik, a managing director, said: "We don't know anything about" the preliminary results.
CalPERS investment committee is expected to select 10 money manager finalists by next March. But the committee will identify another 15 managers as readily available replacements if one or more of the selected 10 begin to fail in investment performance or have other problems.
The names of the other money managers to make the first cut and their strategies are:
ANB Investment Management, large-cap growth; Ark Asset Management, midcap growth; Bank of America, large core/blend; Becker Capital Management, small value; George D. Bjurman, broad/combination growth; Boston Co., broad/combination value, midcap value and large value; Brown Capital Management, large growth; Capital Guardian, large core/blend; Cohen, Klingenstein, Marks, large growth; and Cramer Rosenthal McGlynn, midcap value.
Also, Dimensional Fund Advisors, small value; Edgewood Management Co., large growth; Farrell Wako, small core/blend; Fleet Investment Advisors, small value; Fleming Capital Management, broad/combination core/blend; Geewax, Turker & Co., large growth; Goldman Sachs, selected for large growth and two large core/blend proposals; Groesbeck Investment Management, large growth; R.B. Haave Associates, broad/combination value; American Express Asset Management (formerly IDS Advisory), large growth; Independence Investment Associates, large core/blend; Institutional Capital Corp., large value; and Investment Research Co., large core/blend.
Also, Janus, for large growth; Jurika & Voyles, broad/combination core/blend; Kestrel Investment Management, small value; The Edgar Lomax Co., large value; Loomis Sayles, large value; McMorgan & Co., large core/blend; Meridian Investment Co., large core/blend; J.P. Morgan, two large core/blend proposals; National Asset Management, large core/blend; New Amsterdam, broad/combination growth; and New Providence Capital, middle growth.
Also, Oak Associates, large-cap growth; Oak Ridge Investments, large growth; Oppenheimer Capital, large value; Pacific Income Advisors, broad/combination core/blend; Perry Corp., large value; Pilgrim Baxter, midcap growth; Pillar Point, small core/blend; Putnam, midcap growth; Putnam, large core/blend; RCM, small growth; Riggs Investment Management, large value; RJF Asset Management, small growth; Rosenberg Institutional Equity, small core/blend; Fayez Sarofim, large growth; Siphron Capital Management, large growth; Society Asset, middle value; and State Street Global Advisors, large core/blend.
Also, Thomson Horstman, small-cap value; Trinity Investment Management, large core/blend; Trinity Investment Management, large value; U.S. Trust of New York, large growth; Wellington Management Co., small, core/blend; and Westpeak Investment Advisors, small core/blend.
