Los Angeles City Employees' Retirement System terminated AJO Partners which managed $183 million in active U.S. large-cap value equity, according to pension plan documents.
Officials for the $17.3 billion pension plan placed AJO on watch on June 30, 2016, for underperformance. LACERS had twice extended AJO's contract for one year because of improving performance, but officials decided to terminate AJO's contract, because its relative performance has not improved for the three-year watch period.
Plus, documents for LACERS' July 9 meeting state that AJO's termination is consistent "with a widely accepted view that U.S. large-cap equity exposure should be implemented with passive management."
The money in AJO's portfolio will be transferred to an existing passive S&P 500 portfolio managed by RhumbLine Advisers, which managed $3.2 billion as of March 31.
"LACERS gave us a fair shot to defend ourselves," said Ted Aronson, founder and managing principal of AJO Partners. "The siren song of low-cost, index-matching performance ... was just too compelling. We attempted to make the case that market dynamics, favoring low volatility regardless of price, is the most extreme in history. The last time things were so extreme was the (technology-media-telecom) bubble in from around 1994 to 2000, when growth vs. value set records."
