Massachusetts Pension Reserves Investment Management Board, Boston, today terminated Capital Guardian Trust, which ran $554 million in international equities and $393 million in emerging markets equities, because of performance. The $554 million in international equity money will be divided equally among the $32.4 billion board's other international equity managers: State Street Global Advisors, which currently runs $1.61 billion for the fund; Marathon Asset, $1.48 billion; Boston Co. Asset, $593 million; and Baillie Gifford, $585 million. SSgA will temporarily run the emerging markets equity assets in a managed emerging markets index fund. Board staff and fund consultant William Bensur of Wilshire Associates said the fund terminated Cap Guardian because they had lost confidence that officials there understood and could rectify the problems the company is facing. Chuck Freadhoff, Cap Guardian spokesman, said the company wouldn't comment.
Separately, the system hired Putnam, Mazama Capital, Ariel Capital and EARNEST Partners to handle $250 million each in active domestic small-cap and midcap value equities. Funding primarily comes from the assets Putnam had run for the system a year ago, when it was terminated because of allegations of market timing. Michael Travaglini, MassPRIM executive director, said Putnam was picked because its small-cap value strategy is one of the strongest among those offered by the 67 firms that responded to the board's June RFP, while staff concluded that Putnam's corporate culture and controls have turned around dramatically since the firm was terminated.
Jerrold Mitchell, CIO of the PRIM Board, also announced his retirement today. Mr. Mitchell said he will remain on PRIM's investment committee. Mr. Mitchell had been PRIM's CIO since May 2001. Executive Director Michael Travaglini said that with Deputy CIO Stan Mavromates and the rest of the PRIM staff taking care of business, there's no urgent need to name an interim CIO. The fund will set up a search committee and look at replacements over the next few months. Mr. Travaglini said Mr. Mavromates will likely be among the candidates considered.