Updated with correction
South Carolina Retirement System Investment Commission, Columbia, hired three managers to run up to $2.4 billion, or about 8% of plan assets, in global tactical asset allocation strategies.
The GTAA portfolio will be split evenly among Morgan Stanley Investment Management, PineBridge Investments and Aberdeen Standard Investments, with each firm managing about $800 million, or 2.6% of total plan assets, in separate accounts, confirmed Geoffrey Berg, chief investment officer, in an e-mail.
If necessary, the allocation to individual GTAA managers could rise to 4% each, Mr. Berg said.
The GTAA allocation will rise to 12% when the new managers are fully funded from 8% currently.
The hires are part of the restructuring of the GTAA portfolio of the $30.7 billion South Carolina Retirement Systems, which is managed by the RSIC on behalf of the South Carolina Public Employee Benefit Authority, Columbia, according to a webcast of the RSIC’s meeting Thursday.
The existing GTAA portfolio totaled approximately $2.5 billion as of July 31, with $1.7 billion run in an internally managed synthetic overlay and $796 million managed by Grantham, Mayo, Van Otterloo.
GMO will be retained and initial funding for the new GTAA managers will be drawn from the overlay portfolio.
Stephen Marino, director, core strategies for RSIC, said during the webcast that the new GTAA portfolio structure moves the entire portfolio to active management and will improve investment efficiency with the goal of adding 25 basis points of excess return to the annual total performance of the fund.
Mr. Marino stressed to commissioners that the terms of each managers’ investment contract provide “better alignment of interest” with the pension fund.
The blended portfolio fees are 29 basis points of a management fee, 88 basis points over the benchmark for the hurdle rate and 11.25% for a performance fee. There is a 10-basis-point cap on expenses and an all-in fee cap of 87 basis points. The performance fee is calculated on over a rolling three-year period.
Separately, RSIC commissioners approved a commitment of up to $125 million to Francisco Partners V from the plan's $2.3 billion private equity portfolio.
Francisco Partners Management is a technology specialist and the fund will focus on U.S. companies in sectors including communications and security, financial technology, health-care technology, software and hardware.