AUSTIN, Texas - The $16 billion Texas Permanent School Fund gradually has outsourced $6 billion it has managed internally.
More moves could follow.
The permanent fund is a supplemental funding source for the state's public school program. Last month, fund officials hired nine outside money management firms - three non-core, large-cap domestic equity firms; three high-yield bond firms; and three small- to midcap domestic equity managers - to invest a combined total of about $2.5 billion.
New managers are:
Barrow, Hanley, Mewhinney & Strauss, Dallas; Loomis, Sayles & Co., Boston; and J&W Seligman, New York, who will split $800 million in small-cap and midcap equities;
Oaktree Capital Management, Washington; Salomon Brothers Asset Management, New York; and MacKay-Shields Financial Corp., New York, who will manage a combined total of $800 million in high-yield bonds; and
First Quadrant, San Francisco; Davis, Hamilton, Jackson & Associates, Houston; and Columbia Partners, Washington, who will manage a combined $900 million in non-core, large-cap equities.
Dean Murray, executive administrator, said the new external managers were hired to address asset classes and investment styles not available internally.
He said the bulk of the assets will remain internally managed.
The addition of the high-yield, small-cap to midcap and non-core equity managers allows the fund to fill target needs addressed in an asset allocation study conducted by Investment Advisory Services, Philadelphia.
Of the approximately $10 billion that remains internally managed, Mr. Murray said about 40% is core fixed income and 60% is managed in core equities.
With the new external management hires, the permanent school fund increased its externally managed assets to almost $6 billion from about $4.3 billion.
Don C. Reynolds, chairman of the fund's investment advisory committee, said additional assets could be moved to external management in the future.
"On a long-term basis we would consider moving additional assets outside. The key will be how much will remain in domestic fixed income," he said.
"An issue in moving assets to outside managers is the monitoring process."
The fund's first external managers were hired under the tenure of former administrator Carlos Resendez in 1995, when $1 billion was farmed out to three global balanced managers - Wellington Management Co., Boston; Harbor Capital Management Co., Boston; and Capital Guardian Trust Co., Los Angeles.
