Dallas Employees’ Retirement Fund terminated Western Asset Management from its $200 million global fixed-income portfolio, while Ventura County (Calif.) Employees’ Retirement Association placed the firm on watch for the $436 million managed in two portfolios.
Both pension funds cited the recent news from Western Asset’s parent company Franklin Templeton that the SEC issued a Wells notice to co-CIO Ken Leech, identifying him as a target of an investigation focusing on “past trade allocations involving Treasury derivatives." Leech has since stepped down as co-CIO and fellow Co-CIO Mike Buchanan has taken on sole CIO responsibilities.
The $3.7 billion Dallas pension fund’s board approved its action at its Sept. 9 board meeting, said Alfredo Perez, the pension fund’s compliance officer. Materials for the board meeting posted on its website showed that staff and investment consultant Wilshire Advisors recommended moving the assets to a Bloomberg Aggregate Index Fund, but did not identify the manager or whether a search for an active replacement may occur.
As of June 30, the pension fund’s actual allocation to fixed income was 15.5%; the target is 17.5%.
Separately, the $8.3 billion Ventura County pension fund’s board approved its action also on Sept. 9, a webcast of the meeting shows.
Western Asset Management manages a $236 million core fixed-income portfolio and a $200 million U.S. index plus equity portfolio for the pension fund.
Dan Gallagher, the pension fund's chief investment officer, said in the meeting webcast that the portfolios that Leech oversaw are not connected at all to the portfolios that Western Asset Management manages for VCERA.
He said in the meeting that the pension fund will continue to monitor WAMCO, and the placing of the manager on the watchlist will mean no additional assets will be allocated to the manager for the time being.
As of July 31, the pension fund’s actual allocations to domestic equities and domestic fixed income were 27.9% and 8.9%; their respective targets are 26% and 8%.
Investment consultant NEPC assisted.
A spokesperson for Western Asset parent Franklin Templeton could not be immediately reached for comment regarding either pension fund's action.
