The board will cut its core fixed-income allocation to 5% from 8.5% of total assets in the next six to nine months. It plans to terminate core bond manager BlackRock, with the $448 million it manages used to fund new hires and additions to existing mandates, said Mr. Atwood. Western Asset Management Co. Pasadena, Calif., the board's other core fixed-income manager, will have its portfolio raised to 5% ($600 million) from the current 4.1%.
SSgA, which also is being terminated, runs $541 million in a Lehman Brothers intermediate government/corporate credit index. Those assets also will fund new hires and existing managers.
"We want to diversify away from conventional intermediate (bonds) and look for more aggressive strategies," Mr. Atwood said.
On the terminations, Mr. Atwood said, "It is really an issue of having an excess number of fixed-income managers. Basically we are retaining managers in which we have the highest level of confidence and which fit in our overall portfolio the best."
Chicago Equity Partners LLC and LM Capital Group, San Diego, will have their active intermediate-duration fixed-income mandates rise to 2.5% of assets ($300 million) from the current 1.5%. Funding will come from Harris Investment Management Inc., Chicago, which the board plans to terminate for two portfolios: a $184 million active intermediate fixed-income portfolio; and a $280 million high-yield strategy run through its HIM Monegy Inc. unit in Toronto. Fort Washington Investment Advisors Inc., Cincinnati, the board's other high-yield manager, will continue to manage $282 million for the board.
"The changes say less about Harris and more about LM and Chicago Equity and Western," Mr. Atwood said. "Those are managers that fit best in our portfolio" for core and intermediate fixed income.
The board more than doubled funding to mortgage portfolios managed by Amalgamated Bank of New York and the J for Jobs commercial and residential mortgage fund of Union Labor Life Insurance Co., a unit of ULLICO Inc., Washington. Both will increase to 1.5% ($180 million) from their current respective allocations of 0.4% and 0.7%. The board's other mortgage manager, AFL-CIO Housing Investment Trust, Washington, will continue to run $36 million.