Chicago Policemen's Annuity & Benefit Fund terminated Channing Capital Management because of style drift and underperformance of a $23 million active domestic midcap value equity portfolio, according to minutes from the $3 billion fund's Nov. 22 investment committee meeting.
The retirement fund's investment committee has been reviewing the fund's U.S. equity allocation, which has a target allocation of 21%, for some months and will consider a final recommendation for the overall portfolio at its next meeting in January, Sam Kunz, chief investment officer, wrote in an e-mail.
Eric T. McKissack, CEO and CIO of Channing Capital Management, declined to comment about the termination.
According to the committee minutes, the structure of the domestic large-cap core growth and value equity portfolios will not be changed, although the large-cap core portfolio may be tapped in the future to provide liquidity for benefit payments.
The committee directed the fund's consultant, NEPC, to review the size of each existing large-cap equity manager and to recommend possible rebalancing among the managers.
Separately, the committee accepted NEPC's recommendation to stop making private equity commitments in the foreseeable future “due to current and expected liquidity constraints,” according to the meeting minutes.
Kevin Leonard, lead consultant, told trustees that the fund's total private equity allocation, including commitments and capital drawdowns, totaled about 9% of total assets.
The fund's private equity target allocation is 7%, confirmed Mr. Kunz in his e-mail, noting that another reason for the pause is the “fairly high level of committed but undrawn capital in this space.”