CalPERS staff proposed dropping State Street Global Advisors as manager of a $13.3 billion passive international equities portfolio and shifting the portfolio to internal management, saving the fund roughly $1.3 million in fees annually.
If approved by the board of the $205.8 billion California Public Employees' Retirement System, Sacramento, the shift would boost its internally managed foreign stock portfolio to $27 billion. In February 2005, the board gave staff approval to move up to 50% of the massive portfolio to internal management; the entire amount had been managed by SSgA.
Approval would mean that nearly three-quarters of the $131 billion global equities portfolio — some $97.2 billion — would be internally managed. Currently, 64% of the portfolio is internally managed, up from 56% in June 2003.
CalPERS staff noted the change does not reflect dissatisfaction with SSgA's performance. In fact, SSgA continues to manage other equity strategies for CalPERS.
The CalPERS board will consider the proposal at its Aug. 14 meeting.
"We've been aware for quite some time of CalPERS' plans to bring the management of this fund in-house," said Arlene Rockefeller, SSgA's director of global enhanced equities. "As an institutional investment manager that is known for client service, flexibility and quality investment strategies, we look forward to serving CalPERS' needs as they evolve."
Separately, CalPERS staff recommended including four managers in a pre-approved list of active domestic growth equity managers: Goldman Sachs Asset Management, Jacobs Levy Equity Management, Marvin & Palmer and Turner Investment Partners. Staff also recommended picking INTECH for two strategies in a pre-approved list of U.S. enhanced index growth stock strategies, one benchmarked to the S&P 500 index and one to the Russell 1000 Growth index.
Staff also picked six managers to be included on a pre-approved list of international fixed-income managers: AllianceBernstein, BlackRock, Brandywine Asset Management, Mondrian Investment Partners, Morgan Stanley Investment Management and PIMCO.
In real estate, staff picked five firms to be included on a pre-approved list for managing international real estate securities: Citigroup Property Investors, European Investors, Morgan Stanley Investment Management, Presima and RREEF America.
Wilshire Associates consulted on the equity and fixed-income searches, and Pension Consulting Alliance assisted on the real estate search.