San Francisco City & County Employees Retirement System will terminate Brandes Investment Partners as manager of a $71 million international small-cap value equity portfolio, if approved by trustees at a board meeting Tuesday. Brandes portfolio has been underperforming since 2004, according to a staff memo to the board. Year-to-date returns through Sept 30 were 2.3% vs. 14.5% for its benchmark, the Citigroup World Ex-U.S. index including stocks with a market cap below $2 billion. Brandes portfolio will be allocated to existing international equity managers, according to the agenda for Tuesdays meeting.
Brandes returns have dragged in part because of its overweight position in Japanese commercial banks and a lack of exposure to mining, real estate and hotels, according to a memo to trustees written by Leslie Kautz, a principal at Angeles Investment Advisors, the $16.9 billion pension funds general consultant.
Daniel Hilley, spokesman at Brandes, declined to comment on client relationships. David Kushner, San Franciscos deputy director for investments, could not be reached for comment.
Separately, staff also recommended hiring MSCI Barra to provide a risk management system. An RFP was issued in September.