ISBI, which oversees $15.2 billion in defined benefit assets, dropped Wellington Management, which manages $489.3 million in an active international aggregate bond portfolio, Mr. Atwood said, citing performance.
Wellington was placed on watch for performance in June.
ISBI plans to issue an RFP for a passive international fixed-income index fund on Oct. 5, posting it on its website, Mr. Atwood said. Wellington will continue to manage the portfolio until ISBI hires a manager through the RFP, he said.
ISBI also terminated Herndon Capital Management, which runs $118.4 million in active large-cap core equities, for performance. ISBI plans to reallocate the Herndon assets to an existing S&P 500 index fund managed by RhumbLine Advisers, which had $902 million before the addition.
It also terminated Ullico, which manages $65.4 million in core fixed income, citing its high cash position. “We want them invested, not in cash,” Mr. Atwood said.
ISBI put Ullico on watch last September for its large cash position, which was 52% of its portfolio. Under a plan with ISBI, Ullico was to reduce its cash position to at least 19% by June 30. But its cash position turned out to be 34%. A large cash position could hurt ISBI if interest rates rise because the portfolio is in variable-rate loans, whose rates would rise as market interest rates rise, Mr. Atwood said.
ISBI plans to reallocate the assets to an existing core fixed-income portfolio managed by Garcia Hamilton & Associates, which had $154 million in assets before the change.
ISBI also terminated Ariel Investments for a $23.7 million microcap value equities portfolio, citing performance. ISBI plans to reallocate the asset to an existing Russell 2000 Value index fund managed by RhumbLine, which had $418 million before the changes.
Mellody Hobson, Ariel president, said, “We absolutely understand” the reason for the termination. “That strategy has had a difficult (last) seven quarters but we have tremendous confidence in David Maley (senior vice president and lead portfolio manager for microcap and small-cap deep value strategies). His long-term track record supports that confidence.”
“Despite the loss (of the ISBI portfolio), which is disappointing, we are very upbeat about this portfolio and despite this challenging period, which has been difficult, which we recognize, we are working to get clients the performance they expect from us.”
Wellington media representatives; Kenneth Holley, Herndon principal, CEO and chief investment officer; and Corrine Houlihan, Ullico spokeswoman; couldn’t be reached for comment.
Separately, ISBI committed $40 million to Tristan Capital Partners European Property Investors Special Opportunities 4 LP, a European real estate fund. Tristan is a new relationship for ISBI, Mr. Atwood said.
Marquette Associates, ISBI’s investment consultant, assisted in all the changes.
The changes from the four terminations will reduce ISBI’s investment management fees for those assets to an expected $218,000 annually from the current $2.2 million annually, Mr. Atwood said.