Illinois State Board of Investment, Chicago, dropped Southeastern Asset Management, which ran $302 million in active domestic all-cap value equities, for failure to comply with the $10.1 billion fund's minority brokerage policy, said William Atwood, executive director. Southeastern traded 13.8% of its brokerage commission dollars with minority-owned firms in the 2004 fiscal year, according to a board letter to the firm. The board's policy calls for 15%.
Southeastern had managed money for the board since 1990 and performed consistently well, Mr. Atwood said. It outperformed its Russell 3000 value index benchmark by an annualized 3.7 percentage points a year for the 10 years ended May 31, according to a report by Marquette Associates, the board's consultant. "Achieving a certain performance level doesn't free you from having to follow policy," Mr. Atwood added, saying all other managers have met the policy or subsequently came into compliance.
Lee Harper, Southeastern vice president-marketing, said officials for the company wouldn't comment because of a confidentiality provision in the contract.
Deborah L. Craddock, Southeastern vice president, said in a letter to the board that while Southeastern officials "admire and support your concern for minority-owned businesses" and "made best efforts" to meet the policy, it couldn't do so without risking its fiduciary responsibility.
The assets were split evenly among the board's active domestic large-cap value equity managers: LSV, which now runs $474.5 million; Bear Stearns, $470.5 million; NWQ, $474.5 million; and High Pointe, $126.5 million.
