Fresno County (Calif.) Employees' Retirement Association put domestic small-cap equity manager Kalmar Investments on watch because of performance and concerns about asset flows at Kalmar, said Donald Kendig, retirement administrator, in an e-mail.
Kalmar had about $1.2 billion in net outflows in 2016 driven in part by Vanguard's decision in January of 2016 to remove Kalmar as a subadviser on the Vanguard Morgan Growth Fund and reduce its allocation to 16% from roughly 21% in the Vanguard Explorer Fund.
Although Vanguard's decision did not directly impact the strategy in which FCERA was invested — Kalmar's Growth-with-Value Small Cap equity — that strategy experienced about $113 million in net outflows in 2016, according to a memorandum from FCERA's investment consultant Verus to the pension fund board.
The memorandum added that the strategy underperformed in 2014 and 2015, which Verus believes was due “in large part to stylistic headwinds,” and those returns in 2014 and 2015 have weighed heavily on the strategy's trailing returns. Verus did note that the strategy outperformed its benchmark, the Russell 2000 Growth index, in 2016, for the first time since 2013, due partly to favorable stock selection in health care.
A Kalmar official was not immediately available for comment.
The $4 billion pension fund had about $65.6 million invested with Kalmar as of Dec. 31.