The Indiana Public Employees' Retirement Fund, Indianapolis, is seeking ownership, organizational and other changes at Hughes Capital Management over concern about a concentration of assets and its ability to attract and retain investment professionals and clients, according to a report by Shawn D. Wischmeier, CIO of the $14.6 billion fund.
Hughes Capital runs $107 million in long-term fixed income benchmarked against the Lehman Brothers Aggregate bond index for the pension fund.
Hughes Capital CEO and CIO Frankie Hughes owns 100% of the firm, and "the concern is her ability to attract and retain investment professionals. Hughes consists of only five people. Two investment professionals handle 11 mandates," the report said. Mercer Investment Consulting, Indiana PERF's consultant, "is not only concerned that PERF is 13% of Hughes' assets, but also the different type of portfolios Hughes is managing," the report added. Hughes Capital had $1.082 billion in assets under management as of Dec. 31, according to the ADV form the firm filed with the SEC.
Indiana PERF is recommending Hughes Capital "show a documented process for distributing the ownership of the firm"; "hire two investment professionals"; "gain two accounts of reasonable size without losing any current accounts"; "show positive value added within the security selection and interest rate management areas"; and "increase their client service and consultant relation efforts - both quantity and quality."
Indiana PERF staff and Mercer consultants plan to report to the board on Hughes Capital's progress at a board meeting Oct. 20.
Ms. Hughes declined to discuss the recommendations.