Marin County Employees' Retirement Association, San Rafael, Calif., has authorized its consulting firm Callan to conduct a manager search for a potential replacement of Western Asset Management Co., confirmed Jeff Wickman, MCERA’s retirement administrator.
The measure was approved at the Sept. 18 board meeting.
Wickman noted that the search result will be presented to the board in October at which time they will make the decision on which firms they wish to interview. Any transition will occur after the investment committee decides on whether to hire a replacement manager.
Western Asset declined to comment.
Western Asset manages a core plus fixed-income portfolio for MCERA with a value of approximately $341 million dollars. Western Asset has been a fixed income manager for MCERA since 2001.
Western Asset does not manage any other portfolios for MCERA.
In a Sept. 18 letter to the board of MCERA, James A. Callahan, president of Callan, cited that Ken Leech, co-chief investment officer of Western Asset, took a leave of absence from the firm in August after receiving a Wells Notice from the SEC, and that Mike Buchanan was named the sole CIO of Western.
“This abrupt change is the latest in a series of events at WAMCO that have triggered material concerns about the on-going viability of WAMCO’s core plus strategy for MCERA,” Callahan wrote. “We believe MCERA should strongly consider conducting a manager search to evaluate other potential strategies for this role in the portfolio.”
In addition to Leech’s leave of absence, the letter also cited the earlier sudden resignation of John Bellows, a senior portfolio manager responsible for Fed analysis and macro rates decisions, in April 2024.
“Leech was the senior voice at the firm on Fed policy and macroeconomic strategies, but Bellows was seen as a strong complement and eventual successor to Leech as the firm’s Fed watcher," the latter said. “Bellows’ departure left uncertainty about who will succeed Leech in leading these strategies if/when he retires, and now neither are at the firm.”
Callahan also said in the letter that the appointment of Buchanan as sole CIO “causes concern.”
“Whether this decision was made under pressure from WAMCO’s parent company, Franklin Templeton, or internally by WAMCO's leadership, it signals to us a lack of confidence in Leech's potential exoneration from the allegations,” Callahan wrote. “Despite WAMCO's claims that their internal investigation has not revealed any financial gain for the firm or Leech, their reaction to the situation indicates the severity of the circumstances. Moreover, even if Leech had not received the Wells Notice but had instead retired, there would still be significant concerns about continuity of their macro-driven, top-down focused investment process given their current bench of investors.”
The pension fund has total assets of $3.3 billion, with fixed income accounting for 23.7% of that amount.
