UAW Retiree Medical Benefit Trust, Ann Arbor, Mich., is searching for managers for global equity funds and fixed income funds, with each portfolio likely to be in excess of $1 billion, said Eric Henry, chief investment officer of the $45 billion VEBA fund.
In equity, the United Auto Workers voluntary employee beneficiary association fund issued an RFP for active and passive managers, tracking the MSCI global market indexes.
In fixed income, the VEBA issued an RFP seeking active and passive managers for core portfolios, Treasury inflation-protected securities, and portfolios of long-duration government and corporate securities.
The searches are the result of new asset allocation targets approved by the VEBA’s board from an asset/liability study by consultant Ennis Knupp.
The board hasn’t determined how much in total it will allocate for the RFPs, how many managers and the amount for each asset class. It depends in part on the proposals, Mr. Henry said. Also being determined are the types of equity and other portfolios. However, Mr. Henry said the majority of the total allocation will go to passively managed funds.
“We envision having a large index (fund) allocation,” Mr. Henry said. “We are big fans of broad diversification and low fees.”
“We have not put out a detailed scheduled that responses are due by this (particular) date,” Mr. Henry said. Interested managers can contact Ennis Knupp for the RFPs.
Funding will likely come from a combination of terminating or reducing assignments of its some 75 existing managers and from new cash flow, including dividend and interest from securities of General Motors, Chrysler Group and Ford Motor. The VEBA hasn’t made any decisions on what changes it would make to its existing managers, who are welcome to submit proposals, Mr. Henry said.
The VEBA’s new allocation targets are 50% global equity, 25% core fixed income, 12.5% TIPS, and 12.5% long-duration fixed income. The new allocation also has a zero to 15% range for opportunistic investments, including private equity, hedge funds, high-yield debt and emerging-markets debt.
