Staff at the $170 billion California Public Employees' Retirement System, Sacramento, recommended renewing the contracts for CalPERS' 13 external international equity managers for a one-year period, but changes in the fund's developed market manager lineup are expected.
The fund's active international developed market managers are: Arrowstreet Capital, which runs $562 million; Artisan Partners, $606 million; Baillie Gifford, $594 million; Grantham Mayo van Otterloo, $789 million; Oechsle International, $529 million; and Robeco USA, $601 million. For regional mandates, AXA Rosenberg and Capital Guardian run $763 million and $713 million, respectively, in active European equities, and Nomura Asset Management runs $797 million in Pacific Basin equities. For active emerging markets, AllianceBernstein Institutional runs $747 million; Dimensional Fund Advisors runs $889 million; and Genesis Asset Managers runs $648 million. State Street Global Advisors manages $23.8 billion in a developed markets index fund with a customized FTSE All-World ex-US benchmark.
As reported by P&I Daily yesterday, CalPERS officials proposed issuing an RFP to create a pool of active developed market equity managers because of "disappointing results," according to a staff memo. Underperformance for the year ended June 30 stemmed from an underweighting to Japan, a bias toward growth and large-cap stocks and issues with specific managers, a second memo said. In particular, Arrowstreet, Artisan, Baillie Gifford, Oechsle and Robeco turned in below-benchmark returns in the past year; Oechsle has trailed its benchmark for the fourth consecutive year.
In addition, staff recommended re-upping CalPERS' 10 active domestic equity managers for another year. They are: AllianceBernstein, which runs $783 million; Boston Co., $694 million; Franklin Advisers, $780 million; Geewax Terker, $664 million; Goldman Sachs, $632 million; JPMorgan Fleming, $685 million; Oak Associates, $534 million; Oppenheimer Capital, $655 million; Osprey Partners, $609 million; and Pzena Investment Management, $902 million. In aggregate, the managers gave up 84 basis points against their custom Wilshire 2500 benchmark in the year ended June 30, but they have produced a positive 48 basis-point return since the program was started on May 31, 1998. Consultant Wilshire Associates is closely watching Geewax Terker, Goldman Sachs, JPMorgan, Oppenheimer and Osprey, according to a Wilshire memo.
CalPERS' investment committee will consider the recommendations on Monday.