SACRAMENTO, Calif. — Performance is getting some equity managers in hot water with CalPERS.
Three international managers — Genesis Investment Management LLP, Grantham, Mayo van Otterloo & Co. LLC and New Star Asset Management Ltd. — have been singled out for poor performance by Wilshire Associates Inc., Santa Monica, Calif., general consultant to the $214.3 billion California Public Employees Retirement System, Sacramento.
At least two domestic managers also are being closely monitored.
The scrutiny comes at a time when the fund's external equities portfolios have been underperforming. As a result, the board and staff are re-evaluating the roles of the 30 managers that collectively run more than $20 billion.
London-based Genesis, which runs a $1.4 billion emerging-markets portfolio, underperformed its CalPERS FTSE All Emerging custom index by 85 basis points net of fees for the year ended June 30 and was down a net 264 basis points for the annualized three-year period, according to return data provided by CalPERS.
Michael Schlachter, managing director at Wilshire, said in a letter to CalPERS staff last month that he had “grave concerns” about Genesis. “Wilshire and staff have had several discussions about the role of this manager in the portfolio going forward, and we believe those discussions will reach a conclusion in short order.” Susan Byrne, director at Genesis, declined to comment.
Performance by Boston-based GMO, which runs a $741 million international equity portfolio, was hurt by an early bet in 2005 that commodity prices would drop. The portfolio underperformed the CalPERS FTSE All World ex-U.S. benchmark by 331 basis points net of fees for the year ended June 30 and 199 basis points for the three-year period.
“Although we believe that this is a talented manager in general, the poor performance over the past four years leads us to believe that staff may be better served by placing these assets elsewhere,” Mr. Schlachter wrote about GMO. Tucker Hewes, spokesman for GMO, declined to comment.
London-based New Star's $662 million international equity portfolio underperformed the customized international benchmark by 147 basis points net of fees for the year; three-year returns were not available. Mr. Schlachter in his letter suggested CalPERS staff begin to look for alternatives to New Star. New Star spokeswoman Trina Wilson declined to comment.