VORHEES, N.J. -- An out-of-favor investment style, poor performance and personnel turnover have cost Sturdivant & Co. Inc. three pension fund clients. It is on probation at a fourth.
The Teachers' Retirement System of Illinois, Springfield, terminated Sturdivant in mid-August for performance reasons. Sturdivant managed $100 million in large-cap value equity for the $19.8 billion fund.
The $5 billion District of Columbia Retirement Board also terminated the large-cap value manager in August, which meant a loss of $45 million.
The $15.3 billion Variable A Fund of the $40 billion New York City Teacher's Retirement Systems terminated Sturdivant June 30. The firm managed $60 million in large-cap equity. Fund officials cited performance problems.
Also, Sturdivant's performance is on watch in the emerging managers program at the $37 billion New York City Employees' Retirement System, according to New York officials.
These terminations, coupled with personnel turnover at Sturdivant, captured the attention of the Philadelphia Municipal Employees' Retirement System board, according to recent meeting minutes. Officials won't comment on whether any action has been taken.
Philadelphia put Sturdivant on probation a year ago because of performance problems, and lowered its allocation to $100 million from $165 million.
Sturdivant had lost, as of June 30, nearly $300 million in assets since the end of 1997, when it reported having $1 billion in total U.S. institutional tax-exempt assets under management.
Albert Sturdivant, Sturdivant's majority owner and chief investment officer, would not return phone calls. Paul Foster, marketing vice president, explained there have been organizational changes made in the past year in reaction to questions about performance problems being due to an out-of-favor investment style.
"We are being active about doing the right things. Markets are dynamic and require continual assessments about ways to enhance the process without compromising our philosophy and style. We've taken a hard, close in-depth look at ourselves," Mr. Foster said.
Growth oriented companies, particularly large-cap investments, provided the strongest performance returns this year through the second quarter, according to Pensions & Investments' Performance Evaluation Report.
The Russell 1000 large-cap growth index outperformed the Russell 1000 value index by about 8% as of June 30. In the second quarter, the Russell value index returned 0.5% compared to the Russell 1000 growth index's 4.5%.
Performance for the three quarters ended June 30 was 13.24%, putting Sturdivant in the top third of the large-cap value style group tracked by Callan Associates, according to Sturdivant documents. The Standard & Poor's 500 stock index returned 21.12% for the three quarters, and the S&P value index earned 14.69%, also a benchmark used by Sturdivant clients.
Sturdivant's large-cap value return for one year was 33.8% as of March 31, the last report Sturdivant made to PIPER. The one-year return for the S&P 500 value index was 42.5%, as of March 31. Sturdivant's three-year annualized return was 26.2%, compared with 30.3% for the S&P value benchmark Its five-year return on large-cap value was 19.9%, compared to 21.2% for the S&P value.