Texas Employees Retirement System, Austin, will issue a request for qualifications in the next month or two to set up a pool of preapproved domestic small-cap equity managers, confirmed Mary Jane Wardlow, a spokeswoman for the $21.7 billion plan, in an e-mail.
The move was outlined in an annual review of the system's $12.1 billion global equities portfolio Tuesday during a joint meeting of the board of trustees and the investment advisory committee, according to agenda materials.
Ms. Wardlow wrote that two or three small-cap managers will be preapproved to manage an as-yet-undisclosed amount. The plan's domestic small-cap equity investments totaled $396.7 million as of Dec. 31.
The small-cap pool is similar to the creation of a pool of international and emerging markets equity managers. In December, the board approved Acadian Asset Management, AQR Capital Management, BlackRock, Parametric Portfolio Associates and J.P. Morgan Investment Management as international and emerging markets equity managers. The pension fund has not yet selected any firm to run a portion of the approximately $300 million set aside for investment in active strategies benchmarked to the MSCI ACWI ex-U.S. index and the $200 million targeted for active emerging markets in 2012, Ms. Wardlow wrote in her e-mail.
The source of the funding for both the domestic small-cap and international/emerging market equities allocations will come from rebalancing, Ms. Wardlow said in her e-mail.
The Texas fund had positive returns for the following periods ended Dec. 31, according to a webcast of the Tuesday meeting: quarter, 5.2%; one year, 0.7%; three years, 11.4%; five years, 2.4%; and 10 years, 5.2%. The returns of the internal benchmark for the plan for the same periods, respectively, were 5.3%; 0.3%; 11.7%; 1.8%; and 5%. Multiple year returns are annualized.
