Illinois Municipal Retirement Fund, Oak Brook, terminated Western Asset Management Co. from a $973 million active domestic core-plus fixed-income portfolio.
The $56.4 billion pension fund’s board approved the termination at its Nov. 22 meeting, said Angela Miller-May, chief investment officer.
In a presentation at the pension fund’s Nov. 21 investment committee meeting, Miller-May and investment staff recommended the move due to client redemptions, recent weak relative investment results and overall headline risk.
WAMCO has managed the portfolio for the pension fund since 2001.
A number of pension funds in the past two months have terminated Western Asset Management after the Aug. 21 announcement by parent company Franklin Templeton that the SEC had issued a Wells notice to then 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.
Among those pension funds that have terminated the manager in recent months is the $12.5 billion Chicago Public School Teachers’ Pension & Retirement Fund; $6 billion Kern County Employees' Retirement Association, Bakersfield, Calif.; $3.7 billion Dallas Employees’ Retirement Fund; and $3.6 billion Phoenix City Employees’ Retirement System.
The IMRF portfolio is by far the largest terminated by a public pension fund in recent months. In the presentation, Miller-May and staff recommended moving the assets to four existing fixed-income managers for the time being: $373 million to a passive core portfolio managed by Northern Trust Asset Management (increasing that portfolio to just under $1.6 billion), $250 million to an active core-plus portfolio managed by Loop Capital Management (to $851 million), $250 million to an active core-plus portfolio managed by Longfellow Investment Management (to $845 million), and $100 million to an active core portfolio managed by Brandes Investment Partners (to $446 million).
Miller-May said at the investment committee meeting that staff will present a fixed-income structural review in January, and at that point will determine whether there will be any need for any searches moving forward.
As of Sept. 30, the pension fund’s actual allocation to fixed income was 22.3%.
A spokesperson for Franklin Templeton declined to comment.
