San Diego County Employees Retirement Association on Thursday terminated its investment advisory service agreement with Salient Partners, effective Aug. 15, a news release from the $10.6 billion pension plan shows.
Salient, which is the pension fund's portfolio strategist that had performed the duties of an outsourced CIO, is being replaced by Stephen C. Sexauer, who was hired in May as SDCERA's chief investment officer.
In addition to serving as SDCERA's outsourced CIO, Salient also manages six investment portfolios totaling $4.9 billion, said a report to the board for Thursday's meeting. The largest portfolio managed by Salient is a $2.1 billion risk-parity allocation, representing 20% of the pension plan's entire portfolio. Salient manages the futures and swaps in the $4.9 billion it runs for SDCERA, while PIMCO manages the collateral portfolio less the margin deposits, SDCERA's transition plan presented to the board showed. SDCERA executives plan to transfer $2.5 billion managed by Salient to a passive-plus portfolio that includes index futures and swaps combined with active collateral management. The remainder of the $4.9 billion will be invested in index funds.
Salient is being replaced both as SDCERA's portfolio strategist and as manager of the six portfolios, said Mary Montgomery, SDCERA spokeswoman, in an e-mail.
“SDCERA staff and our consultants are working out the details of the transition plan, including who will be overseeing the index funds, the passive plus and the commodities mandate,” Ms. Montgomery wrote in her e-mail.
“Salient came aboard during a period of considerable market turbulence and, during our tenure, the fund's assets grew by $4.5 billion,” said Lee Partridge, Salient's chief investment officer and managing director in the news release.
Catherine Jones, Salient's spokeswoman, did not provide further comment.
The board terminated Salient based on a provision in its contract with the firm allowing SDCERA to terminate Salient on 30 days' notice for any reason or no reason at all.
SDCERA officials are scheduled to review and revise its investment policy and asset allocation at the board's Sept. 17 meeting, the transition plan states.