2 firms lose bulk of assets when fund ax falls

Gary Bland, former state investment officer for the $14.1 billion New Mexico State Investment Council, Santa Fe, had a penchant for using small money managers that goes back to his earlier days as vice president-trust investments at Boeing Co.

Some of those managers recently terminated by the council had Mr. Bland and the New Mexico council to thank for almost all of their assets under management.

On May 25, three of the managers hired by Mr. Bland were terminated mainly for performance, but also because of what Charles Wollmann, council spokesman, called “concentration risk,” meaning New Mexico accounted for most of the firms' assets under management.

The terminations followed a reassessment of the council's money manager stable because a state law enacted this year shifts responsibility to hire and fire investment managers to the council from the state investment office. Also under the new law, the state investment officer no longer is a voting member of the council.

Terminated were Simms Capital Management Inc., Stamford, Conn.; Beekman Capital Management Ltd., Santa Fe; and Carret Asset Management LLC, New York.

The $395 million Simms managed in two strategies — $242 million in domestic large-cap growth and $153 million in international developed markets — amounted to 84% of Simms' AUM.

The $362 million in domestic smidcap growth equities Beekman managed for the council accounted for 97% of the firm's AUM.

Carret's $256 million in domestic large-cap core assets from the system accounted for 15% of the firm's total assets under management, Mr. Wollmann said.

The council does not have an emerging manager program, he added.

The three managers were hired as part of a sweep of the system's equity managers seven years ago. Mr. Bland launched requests for proposals to manage the council's $7 billion equity portfolio with the primary selection criteria being whether the manager would agree to charge 25 basis points or less.

Seven new active equity managers — many of them small — were hired to replace all but a couple of the existing equity managers.

NEPC LLC, Cambridge, Mass., the system's general consultant then and now, was not involved in the search, said Allan C. Martin, managing partner at NEPC.

Sources said NEPC executives were uncomfortable with the fee requirement being the primary selection criteria and so Mr. Bland conducted the search in-house. Mr. Martin wouldn't discuss why his firm wasn't involved.

Among the new hires were three that had managed assets for Boeing's defined benefit plan during Mr. Bland's tenure there, including Simms and Beekman.

Simms and Beekman stopped managing assets for Boeing sometime between the last quarter of 2000 and July of 2003, according to source estimates. Mr. Bland retired in 2001.

Following the hiring by New Mexico, Beekman, at Mr. Bland's request, moved its headquarters to Santa Fe from New York, sources said.

Mr. Bland was interested in promoting economic development by having money management firms headquartered in New Mexico, these sources said.

Mr. Bland did not respond to repeated calls and e-mails seeking comment. A man who answered the telephone at Beekman declined to identify himself and said Beekman would not comment.

When asked about the New Mexico termination, Arthur Poltrack, Simms Capital principal and chief administrative officer, said: “We are exploring all of our options at this time.”

”We're re-evaluating our situation,” he said, declining to elaborate.

During the May 25 meeting at which the three managers were terminated, NEPC's Mr. Martin reported that the small size of the three terminated managers' staffs were a concern. Indeed, Simms recently lost 40% of its 12-member staff, Mr. Wollmann said.

Beekman's small investment team was also a factor in its termination, Mr. Wollman said. The firm has one portfolio manager, three analysts and one trader/analyst, he said.