REDWOOD CITY, Calif. -- The San Mateo County Employees' Retirement Association has taken a marked shift in favor of passive investing -- an unusual move for a fund in the heart of Silicon Valley.
The $1.5 billion fund shifted about $500 million to passive strategies investing in large- and small-cap stocks and domestic bonds.
Boosting its domestic large-cap allocation to 40% from 27%, the fund decided to invest the entire $600 million allocation passively.
Barclays Global Investors, San Francisco, had passively managed 80% of the fund's allocation; it now manages 100%. Boston Partners Asset Management, Boston, was dropped as active manager of the remaining $80 million. Trustees later plan to allocate 5% slices of $75 million each of the large-cap assets to separate growth and value mandates.
Sid McCausland, the fund's chief executive officer, agreed the changes represented a shift toward passive. William Cottle, a member of the board and principal with Dorn, Helliesen & Cottle Inc., Oakland, Calif., said that the investment committee also will explore using enhanced index funds to provide outperformance.
The board also reduced its allocations to domestic small-cap stocks, international equities and bonds, and real estate.
Small-cap managers Dresdner RCM Global Investors, San Francisco, and Westport Asset Management, Westport, Conn., were terminated. The small-cap allocation was reduced to 10% from 15%, and the $150 million allocation was placed in a Russell 2000 index fund run by BGI.
Meanwhile, the international equity allocation was downsized to 15% of the fund from 20%. The fund terminated Sprucegrove Investment Management Ltd., Fair Haven, N.J., as manager of $90 million in international equity. Existing manager Bank of Ireland Asset Management, Greenwich, Conn., was boosted to $150 million from $135 million.
The fund also eliminated its 5% allocation to international bonds, reallocating most of that money to domestic bonds, which was increased to 29% from 25%.
The fund boosted its allocations to a BGI passive bond fund tracking the Lehman Aggregate index and an active core-plus strategy run by Deutsche Asset Management, New York.