Kentucky Retirement Systems, Frankfort, hired Putnam Investments to run about $675 million in a customized separate account employing the manager's dynamic asset allocation strategies.
The $11.7 billion pension fund's investment committee Tuesday approved hiring Putnam subject to further defining the nature of the portfolio at a May 21 special meeting, according to a video of the virtual meeting.
Andy Kiehl, deputy executive director, office of investments, and Rich Robben, chief investment officer, recommended the new strategic partnership for the pension fund's diversifying strategies allocation.
Funding comes from the termination of Nuveen and Pacific Investment Management Co. from their real-return portfolios due to performance concerns.
Mr. Kiehl noted that the Nuveen Real Asset Income Fund and PIMCO All Asset strategies lost all of their gains from the past five years in March alone, and the strategies have been a concern for some time.
Nuveen and PIMCO currently run a total of about $675 million, Mr. Kiehl said.
Michael Reid, PIMCO spokesman, declined to comment. Nuveen officials could not be immediately reached for comment.
Putnam manages three strategies — conservative, balanced and growth — within its dynamic asset allocation strategies, and the customized portfolio will allow KRS the kind of diversification not currently available within the Nuveen and PIMCO portfolios, Mr. Kiehl said. He also noted all three strategies have had better performance than the current managers' portfolios for five years.
KRS also negotiated a 25-basis-point fee with Putnam, compared with the 88-basis-point fee for PIMCO All Asset and 68-basis-point fee for Nuveen, Mr. Kiehl showed in a presentation.
David L. Harris, investment committee member and chairman of the board of trustees, made the motion to terminate Nuveen and PIMCO and hire Putnam pending further definition of the mandate for final approval at a special investment committee meeting May 21.
As of March 31, the total actual allocation to diversifying strategies was 14.7%.
Investment consultant Wilshire Associates assisted.
