Chicago Policemen’s Annuity & Benefit Fund hired four new fixed-income managers and terminated three as part of an overhaul of its bond portfolio.
At a board meeting on Monday, trustees of the $3.1 billion defined benefit plan approved reducing the fixed-income allocation to 22% from 26% and adding new global multisector, unconstrained and absolute-return fixed-income investment strategies to the portfolio, said Samuel Kunz, chief investment officer, in an e-mail. Until now, the fixed-income portfolio has been invested only in core and core-plus strategies.
Hired to manage the fund’s new strategies were: Loomis Sayles & Co. and Manulife Asset Management for global multisector bonds; MacKay Shields for unconstrained/absolute-return bonds; and GAM USA for absolute-return bonds.
Mr. Kunz said the size of each manager’s allocation remains to be determined.
Three core/core-plus managers were terminated to partially fund the allocations to the new managers: Baird Advisors, $111 million; Oaktree Capital Management, $41 million; and Taplin, Canida & Habacht, $75 million.
“Manager terminations and rebalancing decisions were driven by our new fixed-income structure and strategic allocation for the overall portfolio, and not the performance of the existing managers that have all served the fund wonderfully over the years,” Mr. Kunz wrote.
Additional funding for the new bond managers will come from internal rebalancing among the fixed-income managers remaining in the portfolio before the end of the year, Mr. Kunz said. Neither the names of the existing fixed-income managers nor the changes in their allocations could be learned.
Mr. Kunz said the 4% cut from the fund’s fixed income allocation will be used to pay benefits.