Alaska Retirement Management Board, Juneau, terminated 19 external money managers with portfolios totaling just less than $2.4 billion, said Stephanie Alexander, liaison officer, in an email.
The board approved the terminations at its June 20-21 meeting.
First, the board approved the terminations of master limited partnership portfolios managed by Advisory Research and Tortoise Capital Advisors, which had portfolios totaling $261 million and $271 million, respectively, and Lazard Asset Management and Brookfield Asset Management from public infrastructure portfolios totaling $83 million and $80 million, respectively.
The staff recommended the terminations because of "high correlation and underperformance, combined with a relatively expensive fee structure," according to board meeting materials.
Paul Graffy, managing director, business development, marketing and client services at Advisory Research; Hillary Yaffe, Lazard spokeswoman; and Claire Holland, Brookfield spokeswoman, could not be immediately reached to provide comment. A Tortoise Capital spokeswoman could not immediately provide comment.
The board also terminated PAAMCO Prisma from its $440 million portfolio of hedge funds of funds and opportunistic investments, and Zebra Capital Management from its $115 million long/short equity portfolio. Both terminations were due to underperformance.
PAAMCO Prisma officials could not be immediately reached to provide comment; a Zebra Capital spokesman could not immediately provide comment.
Within its opportunistic asset class, the board also terminated Analytic Investors from a $367 million buy-write account portfolio and three other opportunistic fixed-income managers: MacKay Shields from a $52 million portfolio; Mondrian Investment Partners, $103 million; and Western Asset Management, $63 million.
These terminations were the result of a restructuring of the opportunistic asset class approved by the board. The asset class, created in 2017, has included "defensive equity strategies, niche and broad fixed-income strategies, multiasset tactical allocation approaches, and other strategies that do not fit well in other asset classes," meeting materials said.
Terminations were due to the board wishing to simplify the asset class's portfolio structure and not due to performance, meeting materials said.
Finally, the board approved the terminations of all nine external managers running active domestic small-cap equities: ArrowMark Partners, which ran $50 million; BMO Global Asset Management, which ran $46 million; DePrince, Race & Zollo, $85 million; Frontier Capital Management Co., $45 million; Jennison Associates; $68 million; Lord, Abbett & Co., $88 million; T. Rowe Price Group, $47 million; Victory Capital Management, $48 million; and Zebra Capital Management, $81 million.
The terminations were the result of the staff's review of the board's overall $5.8 billion domestic equity allocation. According to meeting materials, the recommendation is the result of the staff believing "prospective performance can be improved and the manager structure simplified by collapsing the existing set of internally managed and externally managed strategies into the following internally managed mandates: S&P 900, S&P 600, Scientific Beta U.S. MBMS 4-Factor EW and the domestic equity pilot portfolio."
The board also approved the staff's creation of an S&P 900-benchmarked portfolio.
How the assets from terminated managers will be reallocated was not disclosed.
The board oversees the management of $32.5 billion in defined benefit plan assets, including the $16.9 billion Public Employees' Retirement System and $8.3 billion Teachers' Retirement System; and defined contribution plan assets, including the Alaska Public Employees' Retirement System's $1.5 billion DC plan, the state's $939 million Deferred Compensation Plan, and the Teachers' Retirement System's $588 million DC plan.
As of May 31, the actual allocation of non-participant-directed assets was 22.3% domestic equities, 21.4% international equities, 17.1% real assets, 10.8% private equity, 10.6% fixed income, 10.1% opportunistic investments, 6.8% absolute return and 0.9% cash equivalents.