PHOENIX — Officials at the Arizona Public Safety Personnel Retirement System are considering a radical shake-up of its $7 billion investment portfolio.
Staff members are proposing restructuring the pension fund into an “index-plus master manager” program for up to 90% of assets, and an absolute-return portion for the remainder. The latter eventually could subsume much of the master manager program.
If approved by the fund's board at its April 16-18 meeting, it would mark a dramatic change at the fund, 93% of whose assets were run internally as of Sept. 30.
The components of the proposed revamp aren't new. However, “they're being a little bit more creative, and typically, that means better outcomes,” said Rick Roberts, principal at First Quadrant LP, Pasadena, Calif., which is being considered as a master manager.
Plan officials stressed how flexible details about the plan were as of the week ending April 11. Eight managers were interviewed, and anywhere from one to all eight could be hired, if the board approves the program, said CIO Rob Brown. Mr. Brown joined the fund Jan. 7 from Genworth Financial Asset Management, Encino, Calif., where he served as CIO.If approved, the move would shutter the plan's six-person in-house management operation. No job losses are expected; staff would be shifted to researching investments for the absolute-return portfolio and to overseeing new external managers, said Executive Director James Hacking. As recently as four years ago, many of the plan's investments were picked by the plan's then-administrator Jack Cross and his staff.
Mr. Hacking, executive director since August 2005, said because the fund had been highly concentrated in one sector — technology — the amount of risk taken then was “breathtaking.” That heavy tech-stock emphasis largely explains why Arizona lost 36% of plan assets in the two years ended Sept. 30, 2002.