The $3 billion City of Austin (Texas) Employees' Retirement System completed a revamp of its $1.7 billion global equity portfolio in mid-October that simplified the portfolio and added more diversification.
Chief Investment Officer David T. Veal said in an interview that COAERS' primary investment beliefs call for "a default to passive" and a high level of portfolio diversification.
System staffers accomplished the goals by reallocating a total of $606 million of equity assets to five new indexes, which will increase the diversity of the global equity portfolio, Mr. Veal said.
- COAERS awarded Legal & General Investment Management $184 million to replicate the MSCI USA index and $67 million to replicate the MSCI Emerging Markets index.
- State Street Global Advisors was awarded $150 million to replicate the MSCI USA Equal Weighted index.
- TOBAM received $105 million to replicate its TOBAM Maximum Diversification USA index.
- BNY Mellon Investment Management was given $100 million to replicate the Scientific Beta U.S. Maximum Decorrelation index.
- NISA Investment Advisors was awarded an increase of $5 million each to developed markets and emerging markets futures strategies it manages for COAERS. The size of NISA's futures strategies prior to the addition could not be learned.
To make room for the new allocations, Mr. Veal said the fund terminated four factor-based passive strategies based on Scientific Beta's indexes totaling $421 million.
Northern Trust Asset Management was terminated from three strategies replicating Scientific Beta indexes: SciBeta United States Multi-Beta Multi-Strategy Four-Factor Equal Weight index; SciBeta United States High-Factor-Intensity Multi-Beta Multi-Strategy Six-Factor Equal Weight index; and SciBeta Developed ex-USA Multi-Beta Multi-Strategy Four-Factor Equal Weight index.
Legal & General was terminated from a $72 million strategy replicating the SciBeta Emerging Multi-Bets Multi-Strategy (Country Neutral) Four-Factor Equal Weight index.
COAERS also reduced its allocation to the S&P 500 index to 6.2% of the plan assets from 11.8% by reducing accounts managed by Legal & General and NISA by $75 million each. As of Sept. 30, COAERS staff also terminated Legal & General for management of $58 million and NISA Investment for management of $21 million in strategies replicating the Russell 2000 index. The size of each manager's fund prior to the reduction was not available.