Florida State Board of Administration, Tallahassee, has invited five specialty fixed-income managers to apply in a shortlist search for a firm to run $1.4 billion in “unusual, illiquid or difficult to market” securities, according to the RFP.
The bidding is not open to other firms, according to John Kuczwanski, FSBA communications manager.
The board would place in a single portfolio the troubled securities now managed both internally and externally in funds the FSBA oversees. Of the total distressed securities, $739 million is in the Florida Retirement System’s $122.2 billion defined benefit plan, $569 million in the $5.6 billion Florida Prime local government short-term pooled fund, and $115 million in other non-pension funds FSBA oversees.
Federated Investment Counseling is the sole investment manager of the Florida Prime fund, which includes the $569 million in distressed securities, valued at remaining amortized cost, or $279 million, valued at estimated liquidation market value, according to a November Florida Prime report.
Federated was one of the five managers invited to submit a proposal in the search.
The securities are legacy structured investment vehicles that were rated AAA but became impaired or subject to potential losses in the wake of the financial market crisis, said Ashbel C. Williams Jr., the board’s executive director and chief investment officer. Federated was hired in 2008 to manage the Prime fund, which had been run internally.
The specialty fixed-income manager FSBA is seeking would have the objective of maximizing the present value of these distressed assets. FSBA expects the managers to developed and implement a “workout” or liquidation strategy.
“This is a liquidation mandate as no new assets will be added,” according to the RFP.
Proposals from the managers are due Jan. 3. The board could make a decision Jan. 17 after interviewing finalists.
Wilshire Associates is assisting.