Kern County Employees' Retirement Association, Bakersfield, Calif., hired BlackRock to manage up to $150 million in a short-duration fixed-income portfolio.
The $5 billion pension fund's board approved the hiring of BlackRock at its meeting Wednesday, said Daryn Miller, chief investment officer.
The hiring of BlackRock is the result of the creation last April of a 5% target to a new capital efficiency program. The target was funded by a reduction in the target to core/core-plus fixed income to 14% from 19%.
The program, which was created to improve KCERA's risk/return profile, gains synthetic equity exposure through S&P 500 futures. Fifty-five percent of the cash freed up by the exposure to derivatives is used as collateral for the futures, while the remainder is invested in hedge funds to generate future excess returns.
BlackRock's portfolio is part of the collateral pool. Mr. Miller said the remainder of the collateral pool will be invested in U.S. Treasuries and short-term investment funds.
The pension fund issued an invitation-only request for information for the short-duration portfolio, and there were four other finalists: Income Research & Management, Pacific Investment Management Co., Sit Investment Associates and Western Asset Management Co.
Investment consultant Verus Advisory assisted.