The Illinois State Board of Investment, Chicago, today rescinded its termination of Ariel Capital Management as manager of an active domestic smidcap value equity portfolio for its participant-directed $2.6 billion 457 deferred compensation plan. Ariel manages $128 million in the portfolio.
The board, which terminated Ariel for performance on Nov. 17, didn't provide a reason for the change beyond a motion approved by the board. "While ISBI continues to have concerns regarding Ariel's near-term performance in the DC plan, ISBI is also aware that some investors take comfort in the long relationship that the DC plan has had with Ariel, and that some investors value the option of investing with a minority-owned Illinois firm," according to the motion. "Thus, ISBI has decided not to terminate Ariel as an option for the DC plan at this time. The board will keep the firm on the watch list and continue to evaluate its performance."
The board voted to keep Ariel as a manager until Dec. 31, 2007. William R. Atwood, executive director, said Ariel will be terminated then if the board takes no countervailing action. But he said, "We expect to re-evaluate Ariel before then and make a determination" on whether continue with it beyond 2007.
DC plan participants had not been notified of the earlier termination, Mr. Atwood said.
The board terminated Ariel as a manager for its $11.4 billion defined benefit plan on Nov. 17; it ran a $178 million in active domestic smidcap value equities for that plan. The board replaced Ariel with RhumbLine Advisers, which will manage the money in a Russell 2000 small-cap value index fund, a new investment for the board. RhumbLine already manages a $672 million S&P 500 index fund for the board.