Hartford HealthCare, Hartford, Conn., is rebalancing about one-third of its $3 billion in pension, endowment and insurance assets to increase active management and reduce the number of external managers it uses, said David Holmgren, chief investment officer.
Mr. Holmgren said that with market dispersion now occurring, “finally the active managers have tailwinds and all passive investments will be dropped as too risky given unintended market beta.”
Hartford HealthCare hired global equity managers Baillie Gifford Overseas and Aberdeen Asset Management to run $150 million each and Ardevora Asset Management to run $100 million. All three are new managers for HHC.
Also, HHC hired active emerging markets equity managers Numeric Investors and State Street Global Advisors. Numeric, which managed $125 million in active domestic large-cap equities, will move the assets to core emerging markets equities, while SSgA will manage $70 million in emerging markets small caps.
Existing active international small-cap equity managers Pyramis Global Advisors and AQR Capital Management will receive an additional $20 million each, increasing their portfolios to $65 million each.
Although there were no performance issues with HHC's passive managers, BlackRock and SSgA, Mr. Holmgren said, “Given that volatility has returned at the fundamental level, taking passive positions is not prudent in best navigating this environment.”
Mr. Holmgren said the rebalancing shifts “capture the dislocation between large-cap U.S. equities and international and emerging (markets) small caps.” Partial funding came from terminating BlackRock, which ran $150 million in passive U.S. large-cap equities; as well as J.P. Morgan Asset Management, which had run $220 million in active international equities; and $50 million in active U.S. core equities with Grantham Mayo van Otterloo. Mr. Holmgren would not say why J.P. Morgan and GMO were terminated and would not say where the remaining funding came from.
HHC is also reallocating toward what Mr. Holmgren called “higher-conviction strategies,” notably in its 55% growth strategy, which includes private and public equities and a 35% risk-reduction allocation, which includes hedge funds and fixed income. The remaining 10% is categorized as economically hedged assets, including real estate. No change was made to the overall allocation, he said.
In fixed income, Black River Asset Management was hired to run $32 million in a relative value hedge fund, and Shenkman Capital Management's high-yield fixed-income portfolio was increased to $50 million from $25 million. Funding came from the termination of SSgA's $60 million passive domestic fixed-income portfolio as well as three other bond managers, one for global fixed income, one in bank loans and one in high yield; each ran $35 million. Mr. Holmgren would not name the terminated managers and said the remaining assets from the terminations will be assigned to another fixed-income manager that has not yet been selected.