Chicago Policemen's Annuity & Benefit Fund will issue an RFP in early January seeking active microcap equity managers.
The size of the allocation has not been determined, but it might be about $50 million, said Aoifinn Devitt, chief investment officer, in an email.
The pension fund is taking a look at active microcap equity investment because "we are convinced that it is an area that has many inefficiencies and high-alpha generation potential," Ms. Devitt said, noting that "we've had a lot of success with active equity managers in our portfolio and we are a little light on the smaller-cap end of the spectrum."
The search parameters will be fairly wide, and managers of U.S. or global microcap strategies as well as managers of managers will be invited to participate, Ms. Devitt said.
Trustees of the $2.7 billion pension fund approved the search at their meeting Monday.
In other news from the meeting, finalists were selected to present their active U.S. smidcap value equity strategies to the board on Jan. 24.
The firms are Ariel Investments, Chicago Equity Partners, Denali Advisors, Smith Graham & Co. Investment Advisors and Wellington Management. The incumbent manager of the pension fund's $125 million smidcap value mandate, Fisher Investments, also is a finalist.
Ms. Devitt said the smidcap value search, which was announced in June, was a "market discovery exercise."
One or more managers might be hired or the board might decide to retain Fisher Investments, Ms. Devitt said.