Texas Employees Retirement System, Austin, will begin a search for U.S. large-cap equity managers in March 2021, according to a report from the $28.6 billion system's joint board and investment advisory committee meeting held remotely on Wednesday.
In a report on the system's $11 billion global public equity portfolio, investment staff said they "believe it's time to refresh the select pool. While efficient, the sub-asset class makes up a large percentage of (the) public equity (portfolio) and adding managers to the select pool would allow for additional diversification of flexibility."
About 27% of the global public equity portfolio is allocated to external money managers with the balance managed internally. The U.S. large-cap equity portfolio accounted for 43% of the overall portfolio as of Sept. 30 and was managed by internal and external managers, ERS spokeswoman Mary Jane Wardlow said in an email.
Since 2009, Texas ERS investment officers have selected multiple preapproved external managers for various asset classes and could shift manager allocations depending on market conditions. Staff said in the report that the previous search for managers for the U.S. large-cap asset class was conducted in 2010.
According to the global equity report, existing managers running large-cap value strategies for ERS are Barrow, Hanley, Mewhinney & Strauss and Brandywine Global Investment Management. The asset amounts each manager is running for ERS were not available in the report.
Details about the date the RFP will be posted , how many managers will be sought, whether existing managers can rebid and the amount of assets for the assignments have not been determined yet. "It's early in the process and additional details have not been finalized yet," Betty Martin, ERS' director of investment services, said in an email.
ERS investment staff said in the report that manager review and operational due diligence will take place in 2021 and that selected U.S. large-cap managers will be presented to the system's asset class investment committee in February 2022.
Separately, the board approved the removal of large-cap equity blend mutual fund Davis New York Venture A from the $3.8 billion Texa$aver 401(k)/457 plan program, Ms. Wardlow confirmed in an email.
The Texa$aver product review committee recommended termination of the Davis Advisors' active mutual fund because of overall poor performance, a lack of appropriate risk controls, large sector deviation to financials and exposure to international private equities.
Emily Shuey, a spokeswoman for Davis Advisors, did not immediately respond to a request for comment.
The assets from the Davis mutual fund will be transferred to an existing passive large-cap blend equity fund, Vanguard Institutional Index Fund Institutional Plus Shares, which had $533 million under management for the ERS defined contribution plans as of Sept. 30.
