COLUMBUS, Ohio - Minority and emerging money managers are the top performers in eight of the 10 major domestic stock and bond categories in which the $14.8 billion Ohio Bureau of Workers Compensation fund invests.
The fund employs 43 minority-owned, emerging and Ohio-based money managers in a 5-year-old program.
Minority and emerging managers run $1.9 billion - or 12.8% - of the workers comp fund.
One top performer is Chicago-based Ariel Capital Management, which manages $160 million in domestic small-cap value equities. Ariel's annualized return for the three-year period ended March 31 was 18.9% The firm outperformed its benchmark, the S&P Barra 600 value index, by 10 basis points, which is impressive considering the strong return of the index, said Bob Cowman, chief investment officer.
Conning Asset Management, initially hired in 1998 as an emerging manager to handle mortgage-backed securities, was moved to the fund's mainstream manager roster because the firm's assets under management grew because of strong performance and an increased allocation. The Hartford, Conn.-based firm ran $25 million at the inception of the program and now runs $200 million. Conning returned an annualized 10.2% return for the three years ended March 31, beating its benchmark, the Lehman Brothers Mortgage index, which returned 7% for the same period.
Another firm that outperformed its benchmark was The Edgar Lomax Co., Springfield, Va., whose large-cap value equity portfolio returned an annualized 6.7% for the three-year period ended March 30. Its benchmark, the S&P Barra 500 value index, returned an annualized 1.3% in the same period.
"For me, it's a substantial account," said Randall Eley, Lomax president. The Ohio fund hired his firm in early 1998 to manage $75 million, and now it runs $185 million.
Overall, the insurance fund earned an annualized 6.7% rate of return in the five-years ended June 30, said Mr. Cowman. By contrast, the median fund in the Wilshire Associates Trust Universe Comparison Service returned 5.4% for the same period.
And unlike many of the pension funds in TUCS, the Ohio workers comp fund has had a bond-heavy asset allocation that was in place long before Mr. Cowman joined the fund in 1997: 60% fixed income, 26% domestic equities, 11% international equities and 3% venture capital.
Mr. Cowman said the fund holds all of its managers to the same performance standards. As a result, 12 of the 56 managers hired through the program have been terminated since 1997.
Didn't work out
One of the managers that didn't work out was Albriond Capital Management, New York, which ran a $100 million large-cap growth stock portfolio. Albriond was terminated after Alan Bond, its chief investment officer, was convicted June 10 on three counts of investment advisory fraud and three counts of wire fraud.
The fund did not lose any money, Jim Samuel, director of corporate affairs, said. "They turned an incredible profit for us."
Also performing well for the fund are intermediate duration fixed-income managers Taplin Canida & Habacht, Miami, and MDL Capital Management, Pittsburgh, which returned an annualized 6.6% and 8.9%, respectively, in the three-year period ended March 31.