SACRAMENTO, Calif. Sacramento County Employees' Retirement System set a new fee structure for Bear Stearns Asset Management, with a new requirement for receiving its management incentive fees, because its active domestic small-cap growth equity portfolio has been underperforming.
The $47 million portfolio continues to be run under the BSAM name even though the firm was absorbed by JPMorgan Chase. O'Shaughnessy Asset Management subadvises the portfolio.
Under the new fee structure, approved at an Aug. 21 board meeting, the manager has to outperform the benchmark Russell 2000 Growth index by at least 150 basis points over a three-year rolling period before it receives incentive pay, said Jeffrey States, chief investment officer of the $6.1 billion system. Previously, the manager had to surpass the Russell 2000 Growth index on a yearly basis.
This allows us to recover some losses before we pay an incentive fee, Mr. States said.
O'Shaughnessy's small-cap growth portfolio underperformed the Russell 2000 Growth index by 700 basis points over the annualized three-year period ended June 30, according to data on the firm's website.
Jacqueline Meere, spokeswoman at JPMorgan, directed calls to O'Shaughnessy. CEO Jim O'Shaughnessy did not immediately return a call for comment.
Separately, the system is considering four managers for a $60 million international REIT portfolio. Mr. States would not identify the firms. The board will likely hire a manager at its Sept. 18 meeting. Consultant Mercer conducted the shortlist search.
The pension fund's overall investments were down 0.8% for the quarter ended June 30, although they outperformed the system's custom benchmark of -1%. The portfolio returned -4.8% for the year ended June 30, compared to the custom benchmark's -3%, and returned an annualized 7.9% for the three years ended June 30, while the custom benchmark returned 8.5%.