Weyerhaeuser Co., Federal Way, Wash., has gone to an outsourced CIO model for its $4.7 billion defined benefit plan hiring former Chief of Investments Salim Shariff's new money management firm, Federal Way Asset Management.
Weyerhaeuser is the sole client of the employee-owned firm that opened for business July 1, Mr. Shariff said in an interview. All 11 employees at Federal Way Asset worked for Mr. Shariff at Weyerhaeuser.
Mr. Shariff, the new firm's chief of investments, is looking to add one or two other institutional clients, but wants to stay small.
He would not discuss investment philosophy but sources with knowledge of its operations said the firm is expected to continue an aggressive alternative investment philosophy pushed at Weyerhaeuser by Mr. Shariff, a big proponent of hedge funds.
Alternative investments have typically made up more than 50% of Weyerhaeuser's defined benefit portfolio, which has developed a reputation for delivering double-digit investment returns.
Mr. Shariff's firm opened with backing from private equity firm Lindsay Goldberg, which has an equity stake in the firm.
Weyerhaeuser spokesman Anthony Chavez said the new arrangement is a winning proposition for the company because Mr. Shariff had wanted to start his own firm. The new arrangement enables Weyerhaeuser to continue its relationship with Mr. Shariff and his team, while also helping the firm land its first client, he said.
Mr. Chavez also said the arrangement could also help Weyerhaeuser earn royalty fees from Mr. Shariff's firm. Under the terms of the agreement with Federal Way Asset Management, Mr. Shariff is allowed limited use of his track record at the firm in marketing efforts for new clients, he said.
If those clients sign up with Federal Way, Mr. Chavez said the money management firm would potentially pay Weyerhaeuser royalties that would go into the employee defined benefit plan. He said he did not have specifics beyond that.
