O.C. Retirement System Pulls Cash from Husic

The $4-billion Orange County Employees’ Retirement System said it withdrew $170 million in stocks from management by Husic Capital Management, citing concerns about performance volatility and disclosure.

The fund reinvested the money, which was in an “all-capitalization growth” portfolio with Husic Capital, in an account that seeks to match returns of the broad-market Standard & Poor’s 500 Index, said Farouki Majeed, chief investment officer. About $60 million to $70 million of that will later be invested in a new small-company “growth” account with one of four managers vying for the business, Majeed said.

The Santa Ana-based pension fund’s board fired Husic Capital because of “concerns about performance volatility” and “reporting and disclosure,” Majeed said.

Husic Capital--an Orange County fund manager since 1987--no longer fits the retirement system’s revamped equity strategy, Majeed said. He said reporting and disclosure were the “triggering” issues, but declined to discuss them.

San Francisco-based Husic Capital said last month that its filings with the Securities and Exchange Commission contained false claims about founder Frank Husic’s academic credentials. “It was an inadvertent misrepresentation,” Husic Capital attorney Michael Kahn said about the years of filings in which Husic falsely claimed he had a PhD from the University of Pennsylvania and a bachelor’s degree from Carnegie Mellon University.

Orange County “didn’t give other reasons” for firing Husic, other than its revised investment strategy, said William Stephens, the company’s chief investment strategist.

Husic Capital’s clients “are comfortable with our explanation” about the federal filings, he said. “First and foremost” they’re concerned about Husic Capital’s investment performance in this period of market tumult, Stephens said. His company manages about $3 billion in assets.

Husic Capital clients, such as the retirement plans of Ameritech Corp., the Annuity Board of the Southern Baptist Convention, Kaiser Permanente and Managers Funds, declined comment or weren’t immediately available.

One of four managers--Geewax, Terker & Co., John McStay Investment Counsel, Mentor Investment Group and TCW Group--will be awarded the small-company growth portfolio from Orange County beginning Jan. 1, Majeed said.