Minnesota State Board of Investment, St. Paul, on Tuesday selected BlackRock, Citigroup Global Markets, Northern Trust Corp., Russell Investments and State Street Corp. as transition managers to be used on an as-needed basis.
State Street had been the lone transition manager for the board, which oversees $80 billion in state pension and other assets.
Jeff Bailey, director of financial benefits and analysis at Target Corp., Minneapolis, and a member of the board’s investment advisory committee, said that MSBI staff hoped to get transition costs “a bit lower” by having the managers competitively bid for each transition.
No RFP was issued.
Separately, the board approved the staff looking into moving its $1.7 billion internally managed S&P 500 index fund to one of its external U.S. equity index managers, State Street Global Advisors or BlackRock, if the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act could keep it from getting in and out of futures.
“A lot of shoes are still dropping on Dodd-Frank,” Mr. Bailey said. “If futures contracts can’t be used, (the index fund) will be tough to run internally. We’d want a backup external manager if necessary to ensure that we provide the capability to be liquid if needed for our participants.”
Mr. Bailey also told the board that the investment advisory committee and investment staff continue to monitor Pacific Investment Management Co. over the recent departures of co-chief investment officers William H. Gross and Mohamed El-Erian, “but for the moment we ought to stay with that organization.”
“When a manager has such significant staff turnover, that’s cause for any client to revert back to why you hired them,” he said. “But staff will continue to do due diligence on them. It’s still a very strong company.”
The board has about $1.3 billion in a PIMCO core-plus fixed-income separate account.