Indiana State Teachers' Retirement System, Indianapolis, increased the size of planned searches for S&P 500 index fund and enhanced S&P 500 index fund managers.
Robert Newland, investment officer, said the $4 billion fund received state approval to hire managers to run $385 million in straight S&P 500 indexing and $135 million in enhanced S&P 500 indexing. The searches had been expected to be for about $100 million each.
Separately, he said an audit of the fund's custodian, National City Bank of Indiana, appears to have gone well, but the final report from Callan has not been presented.
New York State Common Retirement Fund, Albany, reduced the U.S. large-cap equity portfolio managed by Lord Abbett to $350 million from $720 million because of poor performance, said State Comptroller H. Carl McCall, the sole trustee of the fund.
Meanwhile, Morgan Stanley Asset Management received an additional $50 million to manage in an emerging markets portfolio. The firm will manage a total of $237 million.
Both firms have underperformed their benchmarks. Lord Abbett returned 17.18% vs. 17.73% for the S&P 500 from April 1, 1985, through Sept. 30, 1997, Mr. McCall said. Morgan Stanley's performance was 8.14% vs. 8.45% for the MSCI Emerging Markets Global index since October 1993.
The $370 million taken away from Lord Abbett was allocated to the $96 billion system's short-term investment portfolio.
Concord (Mass.) Contributory Retirement System may have to re-examine its asset allocation if city lawmakers approve paying retirees up to a 3% cost of living adjustment at an April 27 meeting, said Anthony Logalbo, town treasurer. The $45 million fund also might have to examine the implications of this change on funding status, he said. A law passed in June allows the state to pass those costs to local systems.
The system now has 50% of its assets in equities, including about 8% in non-U.S. stocks, and the other half in bonds.
Florida State Board of Administration, Tallahassee, terminated Barnett as a small-cap value manager because of Barnett's recent purchase by NationsBank.
NationsBank did not offer the same product, said Lan Janecek, chief of equities for the $74 billion fund. The $30 million portfolio could be placed in the internal equity asset allocation portfolio or in the co-investment private equity program with Landmark.
The median fund in PIPER's commingled equity universe lagged the S&P 500 for the quarter and year ended Dec. 31. The median fund returned 0.9% for the quarter and 29.5% for the year, compared with returns of 2.9% and 33.4%, respectively, for the index.
The median large-cap core equity fund showed the strongest return for the quarter at 2.3%, and was the only median equity fund to better the index for the year with 33.6%. The median fund in PIPER's small-cap universe performed the worst. The median small-cap growth equity fund lost 4.6% for the quarter and gained only 17.7% for the year. By contrast, the Russell 2000 index fell 3.4% for the quarter and gained 22.4% for the year.
Among bond funds, the median funds in the long-duration and broad market categories performed best for the year at 12.6% and 9.7%, respectively. Both beat the 9.6% return of the Salomon Broad Bond index. For the quarter, the median long-duration bond fund returned 3.9%; the median broad-market fund returned 2.9%. The index returned 3%. The worst performer for both periods was the median limited duration bond fund with 6.8% and 1.7% for the year and quarter respectively
