A number of institutional investors say they have emerging manager investment programs — not for social justice purposes, but because it’s a good way to diversify their portfolios.
Jay C. Rehak, board president of the Public School Teachers’ Pension & Retirement Fund of Chicago, said the $9.7 billion pension fund started investing with emerging managers in 1993, moving about 6% of its portfolio to such managers. Now, it’s at about 33%.
“Diversity gives us a wide range of different investment opportunities,” Mr. Rehak said. “You don’t get homogenous thinking.”
Scott Evans, chief investment officer for the $163.4 billion New York City Retirement Systems, agreed.
“Diverse groups make better decisions,” said Mr. Evans in a phone interview. “There’s a lot less groupthink. We think this is particularly true in the investment management business.”
Cheryl Lynette Hines, director of the $132 billion Teacher Retirement System of Texas’ emerging managers program, said in an interview the Austin-based pension fund’s emerging managers program, launched in 2005, has committed a total of $2 billion in the program.
Ms. Hines added that TRS’ “board felt it was important to allocate capital to outstanding emerging managers. They believe emerging managers are entrepreneurs who should be seen heard and recognized for their accomplishments.”
The number of minority- and women-owned managers in TRS’ emerging managers portfolio nearly doubled to 60% in 2014 from 37% in 2011, with the biggest growth coming among Hispanic-owned firms, Ms. Hines said during the pension fund’s Feb. 12 meeting.
Solange F. Brooks, portfolio manager in the investments executive unit at California State Teachers’ Retirement System, Sacramento, said of the investments the $188.8 billion pension fund has with external managers, a little more than 10% of that is with emerging managers.
“You need diversity to get the best possible return,” Ms. Brooks said. “Don’t put all your eggs in one basket. You can’t have all (your investment) people from New York and Wall Street.”
Senior Reporter Christine Williamson contributed to this story.
