Arkansas Teacher Retirement System, Little Rock, approved manager hires and alternative fund commitments totaling $972 million, and terminations of three equity and fixed-income managers.
The $19 billion pension fund's board approved the actions at its meeting Monday, said Rod Graves, deputy director, in an email.
Within public equities, the board approved the hiring of Arrowstreet Capital to manage $800 million in its ACWI Alpha Extension 130/30/20 strategy, a quantitative global equity strategy with a traditional long/short approach that also adds the "20" to allow for the strategy to "benefit dynamically from the low beta anomaly without a strategic beta of less than one," according to a presentation from investment consultant Aon Investments USA included with board meeting materials.
Funding comes from the termination of global equity managers D.E. Shaw & Co. and Grantham, Mayo, Van Otterloo & Co., which ran $791 million and $416 million, respectively, for the pension fund. According to Aon's presentation, the D.E. Shaw World Alpha Extension strategy has experienced "lackluster" performance, while the GMO Global All Country Equity Allocation has been "susceptible to long periods of disappointing benchmark relative performance."
The additional assets from the terminations will go toward rebalancing of other equity managers' portfolios. The actions shift the balance in the overall equity portfolio to 75% active/25% passive from 87% active/13% passive, according to Aon's presentation.
A spokesman for GMO declined to comment. Officials at D.E. Shaw could not be immediately reached for comment.
As of Sept. 30, the actual allocation to public equities was 50.7%; the target is 57.4%.
Within fixed income, the board voted to terminate Putnam Investments from its $363 million absolute-return fixed-income strategy. Assets will be reallocated evenly between core-plus fixed-income managers Loomis Sayles & Co. and Reams Asset Management, increasing their assets managed for the pension fund to $610 million and $522 million, respectively.
Aon recommended the termination to reduce the fixed-income portfolio's structural underweight to duration, and the reallocation of assets to Loomis Sayles and Reams to bring the fixed-income portfolio to "market duration neutral," according to its presentation.
As of Sept. 30, the actual allocation to fixed income was 14.9%; the target is 15%.
Within real assets, the board approved up to €50 million ($52 million) to DIF Infrastructure VII, a closed-end, core infrastructure fund managed by DIF Capital Partners.
As of Sept. 30, the actual allocation to real assets was 13.3%; the target is 11.1%.
Within private equity, the board approved commitments of up to $30 million to buyout fund Alpine Investors IX and follow-on commitments of up to $30 million each to Franklin Park Corporate Finance Access Fund II, Franklin Park International Fund XI and Franklin Park Venture Capital Opportunity Fund, venture capital funds of funds managed by Franklin Park Associates.
The pension fund had originally committed up to $30 million each to the Franklin Park funds in 2021.
As of Sept. 30, the actual allocation to private equity was 15.6%; the target is 12%.