HARTFORD, Conn. - State Treasurer Christopher Burnham last week terminated 10 money managers for the Connecticut Trust Funds, moving almost $1.2 billion to passive management.
Mr. Burnham - sole trustee of the funds - plans to terminate another 29 money managers in an effort to cut expenses and reduce the fund's manager roster to 30 by the end of the year.
Five equity and two oil and gas managers were cut; their assets, $909 million, will be transferred to an equity index fund managed by Bankers Trust Co., New York. Assets of the three terminated bond managers, totaling more than $275 million, will be transferred to a bond index fund managed by State Street Global Advisors, Boston.
The $12 billion pension fund now will have about 40% of its assets in passive strategies, up from about 25%. Bankers Trust and State Street Global manage all of it.
Four other managers will soon meet with Chief Investment Officer Robert Evans to determine if they, too, will be terminated or if their allocations should be increased, said Karen Jannetty, deputy chief of staff.
The equity money managers terminated and the amounts they managed were: Franklin Portfolio Associates, Boston, which managed about $365 million; Martingale Asset Management, Boston, $169 million; Ariel Capital Management, Chicago, about $83 million; Investment Counselors Inc., St. Louis, about $12 million; and NCM Capital Management Group Inc., Durham, N.C., about $122 million.
Fixed-income managers terminated were: Bear Stearns Asset Management, New York, which managed about $206 million; P.G. Corbin Asset Management, Philadelphia, about $46 million; and Albritton Capital Management, Atlanta, about $23 million.
Mr. Burnham also terminated oil and gas managers State Street Research & Management Co. and Wellington Management Co., both of Boston, and each of which managed about $79 million for the fund.
Terminating the 10 managers will save Connecticut about $4 million annually in management fees, said Mr. Burnham.
He contends those terminated had underperformed their benchmarks or were in styles in which the pension fund would no longer invest.
Most of the managers declined to speak in detail to Pensions & Investments. But Arnold Wood, president of Martingale, disputed the performance numbers released by Mr. Burnham. According to Mr. Burnham, Martingale's enhanced Russell 3000 index fund has underperformed the benchmark by 70 basis points since inception. Mr. Wood said that was not correct.
"Gross of fees, on an annualized inception-to-date basis, this account annualized 14.3% vs. 13.3% for Russell," said Mr. Wood. "With an annual fee of 30 basis points, and this account having started up on April 16, 1992, I simply cannot figure out how the statement could be made that we were 70 basis points below.
Taegen Goddard, Mr. Burnham's chief of staff, said the mistake was an extra zero; Martingale underperformed the benchmark by seven basis points, he said. But the primary reason for the firm's termination was its style was duplicative, said Mr. Goddard. Three other managers used the same style for the fund.
The Connecticut Trust Funds employed 69 money managers when Mr. Burnham took office in January. Only one other public pension fund - the giant California Public Employees' Retirement System - used more managers, according to him. The recommendation to terminate the managers was made by Connecticut's investment consultant RogersCasey & Associates, Darien, Conn.
The four other managers that will meet with Mr. Evans and the investment staff are Atalanta/Sosnoff Capital, New York, which manages about $118 million in large-cap equities; Alliance Capital Management, New York, which manages about $30 million in equities; Brown Capital Management, Baltimore, about $16 million in large-cap stocks; and Capital Guardian Trust Co., Los Angeles, which manages about a $341 million equity portfolio that uses the Russell 1000 as its benchmark.
Ms. Jannetty said RogersCasey suggested more assets should be given to the four managers or they should be terminated. "Those (managers) merited a little further review," Ms. Jannetty said.
Meanwhile, said Mr. Evans, "we are working on fine-tuning the ratio of actively managed assets to passively managed assets." He does not yet know what the final ratio will be.
"It (passive assets) will be significantly larger than it is today. Given the fact that we now have $12 billion under management and it will grow, it becomes a Herculean task to have it all actively managed," said Mr. Evans. "Administratively, it would be a nightmare."
Investments. But Arnold Wood, president of Martingale, disputed the performance numbers released by Mr. Burnham. According to Mr. Burnham, Martingale's enhanced Russell 3000 index fund has underperformed the benchmark by 70 basis points since inception. Mr. Wood said that was not correct.
"Gross of fees, on an annualized inception-to-date basis, this account annualized 14.3% vs. 13.3% for Russell," said Mr. Wood. "With an annual fee of 30 basis points, and this account having started up on April 16, 1992, I simply cannot figure out how the statement could be made that we were 70 basis points below.
Taegen Goddard, Mr. Burnham's chief of staff, said the mistake was an extra zero; Martingale underperformed the benchmark by seven basis points, he said. But the primary reason for the firm's termination was its style was duplicative, said Mr. Goddard. Three other managers used the same style for the fund.
The Connecticut Trust Funds employed 69 money managers when Mr. Burnham took office in January. Only one other public pension fund - the giant California Public Employees' Retirement System - used more managers, according to him. The recommendation to terminate the managers was made by Connecticut's investment consultant RogersCasey & Associates, Darien, Conn.
The four other managers that will meet with Mr. Evans and the investment staff are Atalanta/Sosnoff Capital, New York, which manages about $118 million in large-cap equities; Alliance Capital Management, New York, which manages about $30 million in equities; Brown Capital Management, Baltimore, about $16 million in large-cap stocks; and Capital Guardian Trust Co., Los Angeles, which manages about a $341 million equity portfolio that uses the Russell 1000 as its benchmark.
Ms. Jannetty said RogersCasey suggested more assets should be given to the four managers or they should be terminated. "Those (managers) merited a little further review," Ms. Jannetty said.
Meanwhile, said Mr. Evans, "we are working on fine-tuning the ratio of actively managed assets to passively managed assets." He does not yet know what the final ratio will be.
"It (passive assets) will be significantly larger than it is today. Given the fact that we now have $12 billion under management and it will grow, it becomes a Herculean task to have it all actively managed," said Mr. Evans. "Administratively, it would be a nightmare."
