The number of searches for the second quarter of 2023 decreased to 109 from 147 in the prior quarter, with 45% for service providers, followed by 36.7% for traditional managers and 15.6% for alternatives. The number of alternative searches decreased to 17 from 25 in the prior quarter, but included Illinois Municipal Retirement Fund’s $300 million private credit search as a result of an increased long-term target allocation for alternatives to 14% from 9.5%. There were 49 service provider searches this quarter — 28 for consultants, six for record keepers, and the other 14 for legal, custodian, actuarial, proxy and governance professionals.
Notable activity for the quarter included Border to Coast Pensions Partnership’s three searches totaling $2.87 billion for infrastructure, private credit, and private equity managers. AP7 is looking at issuing multiple searches totaling roughly $13 billion in the future for alternative managers specializing in private equity, real estate, and infrastructure, given the anticipation that the recent update of Swedish investment law can potentially raise the target allocation of alternative investments to 20% from 10% for the next decade.
Ircantec is searching for an active fixed-income manager to manage a $1.1 billion OECD sovereign bond portfolio, and the new contract will last six years. Fonds de Reserve pour les Retraites seeks up to four managers to manage its $379 million French small- and midcap equity portfolio with ESG criteria embedded in the decision-making process.
Separately, Fonds de Reserve pour les Retraites is searching for active managers to manage a $699 million U.S. equity portfolio split between large, mid and small caps, with ESG and carbon-free goals taken into consideration. Alameda County Employees’ Retirement Association searching for two new active managers to manage $304 million in emerging markets equity and $217 million in international small cap equity, based on the recommendations from Verus Advisory at an April 20 meeting. Verus recommended terminating Franklin Templeton and Mondrian Investment Partners portfolios.
Oklahoma Firefighters Pension & Retirement System issued a passive index manager search for its $486 million liquidity portfolio, which currently accounts for roughly 15% of overall portfolio with a blended mix of stocks and bonds, and an ideal manager should offer passively managed index funds, mutual funds or collective investment trusts.
All information is based on transactions reported by Pensions & Investments’ global reporting staff and RFP advertisements.
Hiring activity declined to $58.4 billion from $69.6 billion in the previous quarter. Alternative hires totaled $41.5 billion, a slight increase from $39.9 billion in the prior quarter, partially offsetting a 11% decline in traditional hires. Real estate hires increased 48.5% to $11.4 billion, followed by a 30% increase in real assets. The overall number of hires increased by 11.1% for the quarter to 500 from 450, mostly driven by increases in the number of defined contribution and service provider hires, respectively, as companies released their latest 11-K filings.
BlackRock received seven mandates totaling $4.7 billion, including a hire from Oregon Investment Council for a $1 billion passive all-cap equity portfolio via BlackRock Russell 3000 Index fund. Two other notable climate action-related mandates for BlackRock in this quarter came from Ilmarinen Mutual Pension Insurance Co., which invested $2.2 billion in the iShares Climate Conscious & Transition MSCI USA ETF and $812 million in MSCI Japan Climate Action ETF, respectively. Separately, Ilmarinen Mutual Pension Insurance Co. invested $2 billion in Xtrackers MSCI USA Climate Action Equity ETF, which is managed by DWS Group. CBRE Investment Management was hired by ACCESS Pool to manage $700 million global real estate and $1.6 billion U.K. core real estate portfolios.
BT Pension Scheme Management was hired by EE Pension Scheme as OCIO fiduciary provider to manage its $1.2 billion portfolio. In addition to investments in State Street Global Advisors’ passive equity strategies, Alaska Retirement Management Board hired Legal & General Investment Management America to manage an $800 million international enhanced index equity portfolio; and to reflect an increased allocation to active international equity, Acadian Asset Management and First Eagle Investment Management were hired to each manage $350 million active equity strategies.
There were 48 terminations during the first quarter; nine were non-U.S. EM equity mandates and 13 were defined contribution equity mandates. AP2 terminated three China A-shares mandates managed by UBS Asset Management, Cephei Capital and APS Asset Management due to cost concerns. To reduce exposure to actively managed international equities, Oklahoma Teachers’ Retirement System terminated State Street Global Advisors, Wasatch Global Investors and Wellington Management, and reallocated proceeds to passively managed Northern Trust MSCI ACWI ex-U.S. index fund.