The board of the Hartford HealthCare System, Hartford, Conn., approved mandates of more than $260 million related to a restructuring of the international equity allocation for the system's $1 billion pension portfolio.
The board approved mandates for a 26% allocation to international equities, said David J. Holmgren, Hartford HealthCare's chief investment officer, in an interview.
The mandates are:
- $90 million each to core international equity managers Wellington Management and J.P. Morgan Asset Management for their international research strategies;
- an initial $20 million each, with an option to add another $15 million apiece later, to emerging markets equity managers Aberdeen Asset Management for its Aberdeen Emerging Markets fund and BlackRock for its Emerging Markets Opportunity Fund, an active quantitative strategy; and
- an initial $20 million each, with an option to add another $15 million apiece later, to two managers for a dedicated small-cap international equity allocation: AQR Capital Management's international small-cap long-only strategy and Pyramis Global Advisors' select international small cap strategy.
The international equity segment was the fourth of five asset allocation buckets Mr. Holmgren and his team have restructured this year in turning the Hartford HealthCare portfolio into a “unitary system” — where member hospitals account for a percentage of a master trust — from one where each member had a separate pension plan and endowment.
Mr. Holmgren said the unitary system provides economies of scale that will give member hospitals access to leading money managers at more competitive fees.
In previous restructurings over the past half-year, the Hartford HealthCare board has allocated 10% of the system's pension master trust to absolute-return managers, 31% to U.S. equity managers and 26% to fixed-income managers. Mr. Holmgren said the final 7% of the portfolio will be allocated in November to an inflation hedge bucket comprising commodity, real estate and natural resource money managers.
Mr. Holmgren declined to identify the money managers for the separate pension plans of Hartford HealthCare's five current member hospitals, noting that more often than not those managers were terminated due to the reorganization rather than for any performance-related issues.
Mr. Holmgren said managers for the international allocation, as well as for the system's other allocations, have been selected for their style-agnostic ability to perform consistently in varying market environments.
Hartford HealthCare picked managers “that can trim their sails to succeed in value markets or growth markets,” with the conviction that giving such managers the latitude to invest tactically is preferable to having the system's investment team making tactical decisions, Mr. Holmgren said.
He said the system will look to garner alpha of 120 basis points a year over the portfolio's custom benchmark.
In addition to the $1 billion pension plan, Hartford HealthCare's portfolio includes combined endowment assets of more than $750 million and an insurance trust of $270 million.