The strategy, in which the pension fund had about $200 million invested, was put on alert by Oklahoma TRS in March 2016 because of the departure of a portfolio team member. In June, Advisory Research disclosed to TRS that two more members of the same team were leaving. The strategy was also moving toward a more quantitative approach, Mr. Spencer wrote.
An Advisory Research official could not immediately be reached for comment.
The funds are being reallocated to the pension fund's remaining international small-cap equity managers — Epoch Investment Partners, Wasatch Advisors, Wellington Management and State Street Global Advisors — which currently run between $202 million and $223 million. Each will receive an additional roughly $50 million.
In other news, the $15.3 billion pension fund returned a gross 15.3% for the fiscal year ended June 30, exceeding its policy benchmark of 12.8%. The return for the previous fiscal year, ended June 301, 2016, was a gross -2%.
The top-performing asset class was domestic equity, which returned 21.9%, followed by private equity at 21.1%; international equity, 20.7%; opportunistic fixed income, 14.6%; high-yield bonds, 12.4%; core real estate, 8.3%; opportunistic real estate, 5.5%; master limited partnerships, 4.7%; cash, 0.8%; and core fixed income, 0.75%.
As of June 30, the pension fund's asset allocation was 38.8% domestic equity, 18.87% international equity, 16.3% core fixed income, 5.97% private equity, 5.9% high-yield bonds, 5.48% MLPs, 5.36% core real estate, 1.84% opportunistic real estate, 1.38% opportunistic fixed income, and 0.1% cash.
Longer term, for the five and 10 years ended June 30, the pension fund returned an annualized 11.1% and 6.8%, respectively, surpassing its benchmark returns of 9.6% and 5.7% for the same time periods.