The California Public Employees' Retirement System on Monday said it hired six investment managers and fired one in a bid to boost returns on about $9 billion they invest in stocks for the nation's largest public pension fund.
The $129-billion fund gave the biggest chunks of money--$1.2 billion each--to Chicago-based Brinson Partners and Goldman Sachs Asset Management in New York.
Boston's State Street Global Advisors, the one money manager CalPERS dropped, has to give up $1.8 billion in U.S. stocks managed for the fund, though it continues to work with CalPERS.
Managers will be paid a fee tied to performance relative to newly designed custom benchmarks rather than a flat fee. "When a manager performs well, we win and they win," said Charles Valdes, chairman of CalPERS' investment committee. "When performance lags, CalPERS will pay a lower fee."
CalPERS provides retirement benefits to 1 million California workers and their families.
CalPERS chose 10 firms to manage its active U.S equity portfolios, including four that were already under contract, after sifting through proposals from about 270 money managers since last April.
"Everyone had to reapply" for these assignments, said CalPERS spokesman Brad Pacheco.
Four firms now managing about $1.6 billion failed to make the 10-manager cut, though they will remain until their contracts expire Dec. 31, Pacheco said. The board will decide whether the managers, all part of a CalPERS program that includes firms owned by minorities and women, will get new contracts.
The four are: Spare, Kaplan, Bischel & Associates of San Francisco, with $582 million; ValueQuest Ltd. of Marblehead, Mass., $475 million; Valenzuela Capital Management of New York, $402 million; and Amerindo Investment Advisors Inc. of New York, $99 million.
CalPERS has $58.3 billion invested in U.S. stocks, 85% of which is managed internally in index funds.
The other active money managers chosen were: Oak Associates, Akron, Ohio; Oppenheimer Capital, New York; Putnam Investments Inc., Boston; and US Trust of NY-Campbell, Cowperthwait, N.Y. Each was awarded $1 billion to manage.