San Joaquin County Employees Retirement Association, Stockton, Calif., will consider three options for dealing with active small-cap and midcap value equity management at its Aug. 25 board meeting, said Robert Palmer, retirement administrator. Trustees of the $1.7 billion pension fund are concerned the fund lacks exposure to U.S. midcap value stocks. They also are concerned about the underperformance over the past three years of active domestic small-cap equity manager DePrince, Race & Zollo, which runs $72 million for the fund, he said.
Trustees will consider continuing with DePrince, whose performance is being monitored on a monthly basis, and not doing anything with midcap value, Mr. Palmer said. Secondly, the fund could retain DePrince but reduce its portfolio and those of the plan's two active international equity managers - INVESCO, which runs $188 million, and Capital Guardian, which handles $157 million - into a "smidcap" value portfolio of roughly $25 million to $30 million. Capital Guardian has been on watch for performance, he said. The "smidcap" portfolio could take the form of a traditional long-only mandate or might use long-short strategies. Also, the fund might consider using a single manager or a manager-of-managers strategy. The third option would be to terminate DePrince and issue RFPs for both midcap value and small-cap value managers.
Kelly Carbone, partner at DePrince, Race, did not return calls seeking comment. Chuck Freadhoff, CapGuardian spokesman, declined to comment. Strategic Investment Solutions is consultant.