Mendocino County Employees Retirement Association, Ukiah, Calif., has hired Brandes Investment Partners as a new manager of its international small-cap equity portfolio, confirmed F. Robert Reveles, retirement financial investment officer of the $740 million pension fund.
The board made the hire at its March 19 meeting.
The two other finalists were AQR Capital Management and Causeway Capital Management. Brandes currently manages no other assets at MCERA, according to the pension fund's latest investment quarterly review.
The new hire arose as a result of the pension fund’s desire to restructure its entire international allocation, Reveles said.
Under the new structure of the pension fund’s international equities portfolio, 63% will be a passive portfolio benchmarked to the MSCI World ex-U.S. index managed by existing manager State Street Global Advisors, while 27% will be allocated to emerging markets stocks run by two existing managers — Artisan Partners and Ninety One Asset Management — with the remaining 10% allocated equally to two managers — existing manager T. Rowe Price Group and new manager Brandes.
Under the prior structure, the international equities portfolio comprised the Harbor International Fund managed by Harbor Capital and the Oakmark International Collective fund managed by Harris Associates (with each managing 20% of the portfolio); the Mondrian Investment Partners All Countries World ex-U.S. fund and the EuroPacific Growth Fund managed by Capital Group (17.5% each); the T. Rowe Price International Small Cap Equity fund (15%) and the Ninety-One Emerging Markets Equity Fund (10%).
Reveles confirmed that Harbor Capital, Harris, Mondrian and Capital Group will no longer serve as active managers. These four do not manage any other assets at MCERA, he added.
However, the international equity portion of the fund will keep its 25% target unchanged, he added.
As of Dec. 31, the pension fund had an actual asset allocation of about 24% to international equities.
There was no RFP issued in connection with the hiring of Brandes. At the board meeting Aug. 21, the board approved the change in structure and directed staff and consultant Callan to return with options for managers for the board to consider for inclusion of the new structure.
