Orange County Employees Retirement System, Santa Ana, Calif., hired Longfellow Investment Management Co. and Schroders to manage $125 million each in active domestic core fixed income, spokesman Robert Kinsler said in an email.
Funding comes from cash. General investment consultant Meketa Investment Group assisted.
With the addition of the investments with Longfellow and Schroders, OCERS has a total of $2.2 billion in fixed income — $1.2 billion in a core bond index fund and $328 million in a TIPS fund managed by BlackRock, $269 million in an active core fixed-income fund managed by Dodge & Cox and $196 million in an active core-plus fixed-income fund managed by Pacific Investment Management Co.
Separately, OCERS changed its custom benchmarks for its total portfolio, as well as for its fixed-income, credit and real assets portfolios to match asset allocation changes begun in 2017.
The new total portfolio benchmark shows a lower return for all periods ended Sept. 30 except the 10-year period than OCERS' current total portfolio benchmark. The new total portfolio benchmark return is 10.6% compared to 11.3% for the year ended Sept. 30, 5.8% compared to 7% for three years and 7.5% vs.8% for five years. The 10-year return is 5.5% for both benchmarks.
Not all of the new asset class benchmarks have lower returns. The new real assets custom benchmark has a higher return in the one-and five-year periods ended Sept. 30 than the current benchmark: 11.1% compared to 10.3% for one year and 8.1% compared to 6.4% for five years. However, it has lower returns for the other time periods: 4.9% compared to 6.5% for three years; and 5.8% vs 7.1% for 10 years.
The new fixed-income custom benchmark has lower returns in all periods ended Sept. 30: 0.1% compared to 1% for one year; 2.6% compared to 3.1% for three years; 1.7% vs. 2.5% for five-years; and 4.3% vs. 4.6% for 10 years.
The new credit custom benchmark also has lower returns than the prior benchmark: 7% compared to 7.2% for one year; 4.5% compared to 4.9% for three years; 4.6% vs. 5.4% for five years; and 6% compared to 6.1% for 10 years.