San Diego City Employees’ Retirement System hired Copper Rock Capital Partners to manage $50 million in an international small-cap equity strategy, said the action summary for the Jan. 8 board meeting of the $6.5 billion pension fund.
It will be funded by reducing Grantham, Mayo, Van Otterloo’s $112 million international small-cap equity strategy. GMO has been managing the strategy for the pension fund since 2002. GMO tends to invest in companies with value characteristics, a staff memo stated. Copper Rock is a growth manager.
“While we maintain confidence in GMO and their international small-cap strategy … this value bias can create volatility,” according to the staff memo.
Separately, SDCERS reduced its real estate separate account program to a 35% target largely due to the separate account portfolio’s higher exposure to smaller investments. The actual allocation to separate accounts is currently 52%; the previous target could not be learned by press time. The pension fund will maintain the real estate portfolio’s 55% hard cap to separate accounts. The assets are expected to be invested in core funds and possibly in real estate investment trusts. The overall real estate target allocation is 11%.
Also, the pension fund returned 1.4% for the year ended Dec. 31, compared to its policy benchmark return of 1.5%. Emerging markets debt was the worst-performing asset class at -8.6% for the year ended Dec. 31, slightly better than its benchmark of -8.7%. The best-performing asset class was a combined private equity/infrastructure portfolio with a 14.4% return, surpassing its 10% benchmark.