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March 2015 www.emergingmanagermonthly.com Vol. X, Issue 3
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The $13.9 billion Los Angeles CityEmployees' Retirement System receivedboard approval at its Feb. 10 meeting torelaunch its domestic small-cap equityemerging manager-of-managers search atthe end of the year, according to minutes.
The relaunch of the search will allowqualified investment management firms tosubmit more recent performance and orga-nizational information, the minutes state.
The plan originally conducted thesearch in June as part of a refocusing of itsemerging manager-of-managers to small-cap from mid- to large-cap equities (EMM,6/9/14), however the plan did not make ahire due to "significant near-term under-performance" of sole semi-finalist CapitalProspects, documents from the Feb. 10meeting show.
A copy of the RFP will be available onthe plan's Web site (www.lacers.org) whenissued.
The plan also approved the termina-tions of domestic mid- to large-cap emerg-ing managers-of-managers CapitalProspects and Progress InvestmentManagement Company for performancereasons. Capital Prospects' $45 million
mandate and Progress' $69 million man-date will be transferred to an existingRussell 2000 Index fund managed byRhumbLine Advisers.
The underlying managers in the CapitalProspects’ account included large-capgrowth manager Apex CapitalManagement, large-cap value managerDenali Advisors, large-cap core managerTWIN Capital Management, mid-capgrowth manager Geneva CapitalManagement and mid-cap value managerChanning Capital Management.
The Progress portfolio consisted oflarge-cap core managers John Hsu CapitalGroup and Martin InvestmentManagement, large-cap value managerHerndon Capital Management, large-capgrowth manager Holland CapitalManagement, mid-cap value managerDenali Advisors, small- to mid-cap growthmanager Apex Capital Management andsmall-cap core manager LombardiaCapital Partners.
The plan does not comment on itsinvestments beyond the minutes.
Wilshire Associates serves as the plan'sgeneral investment consultant.
Cheryl Hines doesn't foresee major changes as she settles into hernew role heading the emerging manager program at the TeacherRetirement System of Texas. In fact, she sees the organization asa "model for all others."
"TRS is a highly innovative organization and really in mymind had one of the finest investment programs in the nation,"said Hines, who took over as head of the plan's more than $2 bil-lion emerging manager program in December.
Hines said she is going through the process of evaluating thecurrent portfolio, including looking at the asset allocation strate-gy, making sure the manager selection is appropriate and doingthe portfolio monitoring and rebalancing.
"In terms of what I am going to be doing, I think that is really
two-fold. The program is kind of like the New York City subwaysystem, it is always running 24/7," said Hines, who joined theAustin-based plan from New York-based Oppenheimer AssetManagement. "And that means that there is going to be no breakin any of those things."
She noted that the efforts will be more about where improve-ments can be layered in. "My feeling about it is anything that Iwant to do can and will get done in a very timely fashion. That isexciting for me," she said.
Hines spoke generally when discussing potential changes tothe portfolio and said she will continue with the plan's continued
Texas TRS Emerging Mgr. Head Hitting Ground Running
The $10.3 billion Public School Teachers'Pension & Retirement Fund of Chicagohas issued an RFI for minority-, women-and disabled-owned direct private equitymanagers, as first reported by EMM onFeb. 12.
The plan is currently working with gen-eral investment consultant CallanAssociates on a private equity pacing planand will use the RFI to see if the field ofmanagers is deep enough to warrant theissuance of a full RFP in the future,according to Andrew Kelsen, portfoliomanager for alternative investments.
"This is part of what we hope tobecome more of an annual process to get asense of who's in the market…We want tohave as much information as possible," hesaid.
The plan had approximately 19.2% ofits private equity assets invested withMWDBE managers, as of June 30, 2014.
See CHICAGO, Page 12
Chicago TeachersIssues EmergingPrivate Equity RFI
See InFocus, Page 6
LACERS To Relaunch Emerging MoM Search
Lebenthal Asset Management andLebenthal Holdings CEO AlexandraLebenthal have acquired minoritystakes in AH Lisanti Capital Growth.
The firm will change its name toLebenthal Lisanti Capital Growth,with founder Mary Lisanti remainingas president of the firm and its largestshareholder.
Lisanti said in an interview thatthe deal is aimed at helping grow thefirm through additional avenuesLebenthal brings to the table, includ-ing accessing broker-dealers through Lebenthal's wealth manage-ment platform and municipalities through its broker-dealer businessas well as increasing awareness of the firm's mutual fund.
The firm will continue to be majority woman-owned, with Lisantiholding 49%, Alexandra Lebenthal holding 3% and Lebenthal AssetManagement taking a 48% stake.
"It was particularly important to both Alex and myself that thebusiness remain women-owned," Lisanti said.
The firm was previously 51% owned by Lisanti and 49% ownedby Adams Harkness Asset Management, which was a holding com-pany for the stake.
AH Lisanti was founded in 2003 and managed $290 million indomestic small-cap growth equity as of Dec. 31. The firm alsolaunched a small- to mid-cap strategy last July.
"I am pleased to welcome Mary Lisanti and her team toLebenthal," said James B. Lebenthal, ceo of Lebenthal AssetManagement, in a statement. "Her specific market expertise will bea welcome addition to the range of strategies that LAM can offer toour investors and wealth management clients. Her formidable trackrecord and client-centric focus will truly extend and complement theLebenthal tradition."
March 2015 Emerging Manager Monthly Page 2
News.................................................Pages 2-4NY State Plans Hold Emerging Manager EventsExpert Advice: Simons Says
InFocus.............................................Page 6Cheryl Hines, Teacher Retirement System of Texas
Marketing..........................................Pages 7-8Clifford Looks To Stand Out From CrowdNaylor Brings Unique Backgrounds To Institutions
Alternatives......................................Pages 9-10TerraCap Launches Value-Add RE Fund
Searches...........................................Pages 12-15University of California Eyes Emerging Absolute ReturnISBI Makes Emerging Hedge FoF HiresPhilly Conducting Equity, Fixed-Income Searches
Little Black Book...............................Page 16Chicago Teachers Names Executive Director
Industry News..................................Page 17
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Managing EditorMatthew McCue
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Deputy EditorNick Lioudis
ReporterZack Cziryak
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Ravindra Deo, cio and chief technology officer at Altura CapitalGroup, has been named the new cio of the $437 billion FederalRetirement Thrift Investment Board, the plan announced. He willstart in his new position on April 1.
“Ravi has the skills and experience we were seeking to managethe Thrift Savings Plan. We are very pleased to have him join theteam at the FRTIB as we work to help our participants to retire withdignity,” Executive Director Gregory Long said, in a statement.
Deo spent seven years at Altura Capital and previously servedas cio of Accessor Capital Management for 14 years.
The plan began a search for a cio in October to replace TracyRay, who is retiring this year.
Altura, which offers an emerging manager database to institu-tional investors, did not return a call seeking comment by presstime.
Altura Capital Group CIO JoinsFederal Retirement Thrift Board
Alexandra Lebenthal
Minority- and women-owned asset management firms shouldremain persistent and diligent when trying to develop working rela-tionships with institutional investors, said Thomas K. Lee, executivedirector and cio of the $108 billion New York State Teachers'Retirement System at the plan's Fifth Annual MWBE Investmentsand Professional Services Conference last month.
Lee told attendees of the Feb. 12 event in Albany, N.Y. that heunderstands the frustration emerging managers may feel when nothearing feedback from institutional investors and promised thatfirms looking to deal with the Teachers plan will always receive ananswer from plan staff.
"As opportunities come in, I think what's really important is thatfor a public pension plan to be receptive to the inbound call andinbound opportunities," Lee told the conference audience. "What Iwill make is a commitment that if anybody calls New York StateTeachers, you will get a response from us and we will close the bookbecause I know that one of the frustrating things is that when youcall a pension fund for something, that it comes in and all of a sud-den it goes into a black hole and you don't know what happened toit."
For firms that receive a "no," Lee stresses that that does not sig-nal the end of the line between the plan and any future business withthe individual firm.
"Please expect that a 'no' is based on our view and view of theopportunity but then again don't give up, because this is a businesswhere market cycles change, pension fund needs change and earlyinbound calls, we're very receptive to them," he said.
March 2015 Emerging Manager Monthly Page 3
Emerging Managers Should RemainPersistent, NYSTRS CIO Says
The $180 billion New York State Common Retirement Fund contin-ues to make strides in expanding and promoting diverse and emerg-ing manager investments, the plan said during its Eighth AnnualEmerging Manager & MWBE Conference.
The plan, which announced more than $1 billion in new emerg-ing manager investment commitments at the event on Feb. 13 inAlbany, N.Y., now allocates more than $5 billion to its dedicatedemerging manager program and more than $9 billion to minority-and women-owned firms (MWBE) overall.
For State Comptroller Thomas DiNapoli, sole trustee of theretirement fund, the exposure to emerging and diverse managers hasbeen a priority for him since being appointed to the position in 2007.
"Now when I first became comptroller I had heard too manycomplaints that unless you were part of the established network ofinvestment relationships with New York Common, that the doorswere closed to you. And we certainly wanted to turn that around ineach and every way because if we're limiting access in terms ofthose who can manage our money, we were not going to have theexposure to all of the talent that's out there that could help makeimportant gains for our fund and keep us in a strong position," hetold attendees of the event.
According to DiNapoli, the success of emerging and diversemanagers has made it a no-brainer to continue with the program asthe plan looks to accomplish its number one goal in providing strongreturns for its plan participants.
"The reality is that we have gained strength because of these rela-tionships and because of this program," he said. "We have madediversity a strategic priority through all aspects of the comptroller'soffice with all of the work that we do but certainly I've had a partic-ular commitment to our commitment to diversity with regard to themanagement of the pension fund assets."
Despite the strides already made by the plan, which includeemerging manager programs in virtually all of its asset classes,DiNapoli stressed that the objective is far from complete in terms ofallocating funds to high-producing managers.
New York State Plans Hold Emerging Manager ConferencesEMM Reporter Zack Cziryak headed up to Albany, N.Y. last month to attend the back-to-back emerging manager events put onby the New York Teacher’s Retirement System and the New York State Common Retirement Fund.
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"We're very, very pleased about the work and the numbers tellthe story," he said. "By encouraging this program and diversity wehave strengthened our bottom line. So it is always with pride whenI talk about this program. I talk about it in the context of not only itbeing the right approach to take, but really the smart and bestapproach take from a business approach and that's why we're goingto continue to open the doors of opportunity as wide as possible."
DiNapoli Touts CRF’s Expansion ofEmerging Manager Investments
In my last article, I talked about the SEC’s Examination Priorities for2015. Today, I want to talk about proposed rulemaking in 2015. At the"SEC Speaks" on February 20th, all five of the SEC Commissionerstalked about plans for 2015. Below are comments from the speechesof three of the Commissioners.
SEC Chair White Chair White identified that one of the core initiatives for 2015 is tostrengthen asset managers.
The Staff has been developing recommendations to address theportfolio composition and operations of today’s asset managementindustry, which manages more than $62 trillion of assets:
To modernize and enhance data reporting for both funds andinvestment advisers;
To require registered funds to have controls in place to more effec-tively identify and manage the risks related to the diverse compositionof their portfolios, including liquidity management and the use ofderivatives in mutual funds and ETFs; and
To focus on planning for the impact of market stress events, orwhen an adviser is no longer able to serve its clients.
Over the course of this year, the SEC will consider each of theseinitiatives and will be looking to market participants for their views,which I would expect to be largely negative and include suggestionsthat the SEC consider some kind of cost/benefit analysis.
Commissioner GallagherCommissioner Gallagher addressed the Department of Labor’s (DOL)2010 proposed Fiduciary Rule that would have broadly defined theterm "fiduciary" for purposes of the DOL-administered ERISA, as aperson who provides investment advice to plans for a fee or othercompensation. That proposal, which would have radically alteredwell-established law, was based on DOL’s desire to take actionagainst investment professionals who DOL believes provide inaccu-rate, misleading, or biased advice due to undisclosed conflicts ofinterest.
One of the main criticisms of the proposal was that it would haveseverely limited investor access to qualified investment advice andinvestment products. DOL withdrew the proposal in 2011, but it wasonly deferred, not denied. Based on recent reports, the re-proposalwill be published soon.
There are two general approaches to regulating conflicts of inter-est. The first is simply to ban them or, as the DOL may attempt, toeffectively ban them by issuing rules full of so many ill-defined hoopsand hurdles that any reasonable regulated entities would throw theirhands up in defeat. The second is to mitigate potential risks associat-
ed with conflicts through market rules, disclosure, compliance andenforcement-the approach taken by the securities laws now.
Conflicts exist, that we cannot deny. But, investors and our mar-kets are better off when we seek to manage those conflicts, throughdisclosures or otherwise, rather than eviscerating entire business mod-els and the benefits they provide.
Commissioner AguilarAn additional goal for 2015 is for the SEC to improve its diversity. The statistics show that, as of January 2015, 33% of the SEC’s work-force were persons of color, and just 13% were at the senior employ-ee level. As of fiscal year 2013, the SEC’s senior officers were approx-imately 87% white, while only 5.6% were African-American, 4%Asian-American, and 2.4% Hispanic. The numbers did not changemuch at the mid- and first-level category of managers, which wereapproximately 80% white, but only 8.4% African-American, 7.5%Asian-American, and 3.8% Hispanic. In fact, as of January 2015, twoof our operating divisions had no minority senior officers-zero. Twoother divisions only had one minority senior officer each, whileanother division-and one of our largest divisions with more than 1,240employees-only had three minority senior officers. These statisticscover all five of the SEC’s operating divisions. Clearly, these dismalnumbers need to be improved.
* * *I’m not sure that I agree with Chair White that we need more regula-tion, especially without anyone conducting a detailed cost-benefitanalysis based on costs that are estimated by the industry rather thanthe SEC. The SEC does a reasonable job calculating hours requiredbut not such a good job determining whether that means hiring andtraining additional staff to meet the new requirements.
I agree with Commissioner Gallagher’s concerns about the DOLadopting new rules that may not benefit the investing public and con-flicting with SEC rules that have been in place and apparently work-ing for decades. Can this just be about turf?
With regards to Commissioner Aguilar’s comments, I was in thePhiladelphia Office in the mid 90’s when we were increasing staff,and we actively searched for minority candidates for examiner posi-tions. Although we were able to hire a number of exceptionally qual-ified women, other qualified minority candidates were being hired bythe big accounting firms who were hiring at greater compensation andopportunities for advancement than the SEC could offer. I don’t thinkthat situation has changed.
If you are interested in reading the speeches of all of theCommissioners, they are available at: www.sec.gov/news/speeches.
March 2015 Emerging Manager Monthly Page 4
Perspective on2015 SECCommissionerSpeeches
Tim Simons is a senior managing member of Focus 1Associates, a provider of regulatory compliance serv-ices, responsible for assisting clients with updatingpolicies and procedures, assisting with regulatory fil-ings, designing and implementing testing for the firm�sannual review, reviewing marketing materials, andconducting Mock SEC examinations. Prior to joiningFOCUS 1, Tim was a Chief Compliance Examiner inthe SEC�s Philadelphia Office where he also super-vised a Branch of Investment Adviser/InvestmentCompany Examiners and participated in over 200examinations between 1988 and 2000.
By Tim SimonsFOCUS 1 Associates
Simons Says
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California Public Employees’ Retirement SystemCity of BaltimoreCity of Dallas Employees’ Retirement FundDistrict of Columbia Retirement BoardEmployees’ Retirement System of TexasFederal Reserve System Employee BenefitsFirst Guarantee Pension FundHoward UniversityIllinois Municipal Retirement FundKaiser PermanenteMetropolitan Transportation AuthorityNew York City Office of the ComptrollerNew York State Common Retirement FundNew York State Insurance Fund & NYCERSNew York State Teachers’ Retirement System Teacher Retirement System of TexasTeachers’ Retirement System of State of IllinoisTIAA-CREFUS. TrustVerizon Investment Management Corp.Virginia Retirement SystemYMCA Retirement Fund
practice of making invest-ments with little publicannouncement unlessrequired.
"We've been very pleasedwith the portfolio andpleased with the results thatit has delivered so I wouldsay that going forward weare not going to abandonthose areas that have deliv-ered those results…I thinkwe have been fortunateenough to have found thereally great managers and soon a whole we are going tocontinue to support them,"she said.
In terms of analyzingasset classes or strategies where the plan does not currently havean investment, Hines said there are quite a number of opportuni-ties within the markets. "I think that on the private market side,there are quite a number of opportunities in buyouts…I thinkthere are opportunities also on the long-only side and alternativeinvestments," she said.
The emerging manager portfolio is currently made up of directinvestments of $260 million to 16 private equity funds, $385 mil-lion to 15 real assets funds, $146 million to 13 hedge funds and$95 million to seven long-only funds as well as indirect invest-ments of $789 million to private equity in 68 funds and co-invest-ments and $219 million to real assets in 19 funds and co-invest-ments. The plan also has an additional $150 million that has beenallocated to the indirect program that will be fully deployed bythe end of the year.
Hines said she believes both funds-of-funds and direct invest-ments can benefit a portfolio and does not foresee the use offunds-of-funds stopping. "I think both have opportunities therefor us and we just have to evaluate which ones are worth partic-ipating in," she said.
While many other plans across the country have started tomove to direct mandates, Hines said the funds-of-funds workingwith TRS have met their expectations.
"We look at all of the numbers on a net-of-fee return basis. Weare looking at how they did…we have been very pleased. I thinkwe have been fortunate with our fund-of-funds strategies," shesaid. "You are always going to have times when strategies don'tdo as well but over the long term…we really want to see that weare adding value and so far we have done so."
Hines also is a believer in active management.
"I think it can work and it has worked across all asset classes.The reality is a large number of active managers have underper-formed their benchmark…but this doesn't mean that everyoneshould adopt a passive management strategy. What it means ismanager selection is just that much more important. It is impor-tant across all asset classes but it may be more important acrossthe long-only active equity space," she said, noting that shebelieves TRS has the ability, knowledge, resources and expertiseto identify managers that can outperform.
Hines didn't have much time to get settled prior to TRS host-ing its annual emerging manager conference in mid-January.
Hines said she was surprised by how well received the confer-ence was and believes it was a tremendous success and learnedfirsthand how important emerging managers are to TRS.
"Investment is really a relationship business. It is about estab-lishing relationships and having trust in the strength of those rela-tionships and the conference was really an example of that," shesaid.
Hines said all forms of contact with the emerging managerstaff—which includes Associate Andrew Cronin, Analyst KristaKerr and Contract Analyst Edgar Mayorga-Cruz—are acceptablebut e-mail, in general, is the most efficient way to contact theplan. Interested managers can contact the plan [email protected].
"I think that the key thing for us is to listen to our managers,to hear what they have to say and be sure that we are giving care-ful consideration to each manager because the fact of the matteris we have a fixed amount of capital and what we give to onemanager we can't give to another, that is capital that is not avail-able to another manager. We are really seeking to find best inclass managers out there and I recognize the importance of thisand it is therefore important for us not only to hear from man-agers but also to reach out to seek and find them. What a shameif there is a best of class manager out there that we haven't soughtout and found," she said.
"They should continue to expect the positive experience fromus. They should expect us maybe asking a few more questions.We've always asked questions, I think I'd like to do more of thatto really hear what managers think and understand that evenmore so," she said.
She said she will also work on ramping up the communicationwith managers to help them understand how their strategy relatesto what the plan is doing and if they don't get an investment, pro-vide a dialogue on why not.
"I am here to work with the emerging managers and to sort offigure out ways that together we can help ensure their successand our success as well. I view this as a win-win situation withemerging managers when we allocate to outstanding emergingmanagers, it helps our portfolio and we get great performance,which is great for TRS but it also helps the emerging manager bemore successful and help grow their business," she said.
March 2015 Emerging Manager Monthly Page 6
TRS To Focus On Communication With Emerging Managers
This month, EMM spoke with Cheryl Hines, the new head of the emerging manager program for the Teacher Retirement System of Texas.
Continued From Page 1
Cheryl Hines
Clifford Capital Partners isn't afraid to go against the market. In fact,the firm is banking on its success going against the grain will forceinvestors continually shifting their active management to inefficientparts of the market to find a spot for its domestic all-cap value equi-ty strategy coming up on its five-year track record in August.
The Chicago-based firm offers a concentrated strategy thatincludes a contrarian bucket aimed at taking advantage of short-termshifts in the market to generate increased alpha.
"Today, one of the real concerns is that we are in a beta desert andorganizations are looking for alpha and we believe that we havedemonstrated that we can provide alpha. Our belief is if you are amanager that can provide alpha, then you can get that look. Yes thereare a lot of headwinds that are out there, but when it is all said anddone, everyone is looking for alpha," said Wayne Pierson, chiefcompliance officer at the firm.
The belief has already paid off, with the firm recently earning itsfirst emerging manager allocation through manager-of-managersFIS Group. "We are excited to be with FIS Group," said MichaelPierson, who joined the firm in March 2013 to initiate the firm'sbusiness development efforts.
Michael said the emerging manager space has been an initialfocus of the firm's marketing and the firm recently won a mandatethrough an undisclosed emerging manager program run by manag-er-of-managers FIS Group.
"The emerging manager programs are an excellent opportunity togrow your business, especially on the institutional side," he said,adding that the firm has also focused on populating the various data-bases and accessing investment consultants.
The firm was founded by Wayne and Portfolio Manager RyanBatchelor. Pierson was previously the long-time cio of the MeyerMemorial Trust, while Batchelor was a senior analyst at WellsCapital Management and prior to that an equity strategist and ana-lyst at Morningstar.
Wayne's experience as an allocator to external managers provideshim a unique view on what investors are looking for in a firm.
"Literally, I've interviewed and spent time with hundreds, if notthousands of managers, over the years," Wayne explained.
The strategy has 25-35 holdings made up of core and contrarianpositions, with the core positions making up 50% to 75% of the port-folio and the contrarian positions filling out 25% to 50%.
The process is grounded in a bottom-up fundamental processbuilt around Clifford's "C-Quad Philosophy," a proprietary portfoliomix developed by the firm.
The core portion of the portfolio looks to invest in "wide-moat"companies that are generally identified as leaders in their respectiveindustries. Batchelor said core companies grow intrinsically overtime and have sustainable competitive advantages that are attractivefor long-term investments.
The firm uses a 10-step process to identify core stocks: consis-tently high returns on equity over the last 10 years; consistently highreturns on assets over the last 10 years; upward-trending net income;
manageable debt loads; products or services with low risk of obso-lescence; good employee relations; pricing power; low capital inten-sity; history of share repurchases and a declining share count; andhistory of upward-trending book value and share price.
The contrarian portion of the strategy is the deep value, oppor-tunistic part. "Basically, we are trying to add significant alpha on thecontrarian side," Batchelor said.
The goal is to identifying companies where there are temporaryissues that cause a temporary dislocation between price and value.
"The stock market is a gift to the bottom-up stock picker in thatsometimes investors overreact to certain companies," he said.
Having the temperament to take on a contrarian view can be dif-ficult for investors, Wayne said.
"Value investing and contrarian investing, you are definitelystanding out against the crowd and it can feel like a dangerousplace," Wayne said. "It feels safer in the herd. Everybody ownsApple…that feeling of safety is not worth the potential rewards youare missing by buying deeply undervalued securities."
Batchelor said that by focusing on risk control the firm is able totake those positions. "Our process is really revolved around risk con-trol. We think if you watch the downside carefully…if you are con-fident in the downside…then the upside will take care of itself. Wedon't make heroic assumptions in our fair value estimates. We areassuming reasonable scenarios that aren't out of line with history," hesaid.
The strategy has worked, as the firm has generated annualizedreturns since inception of 21.14% through Dec. 31 with an upsidecapture of 101.3% and a downside capture of 73.4% compared to theStandard & Poor’s 500 Index.
The firm currently has approximately $50 million in assets undermanagement. "We did very little marketing during those first fewyears," Batchelor said. "We wanted to ensure we had the rightprocesses in place, a solid foundation of performance in place."
March 2015 Emerging Manager Monthly Page 7
Clifford Capital Partners Finds Success In Contrarian Views
SSuuppeerrMMaarrkkeett A focus on marketing and third party firmsThe
Value investing and contrarian investing, youare definitely standing out against the crowd
and it can feel like a dangerous place. It feelssafer in the herd. Everybody owns Apple...that
feeling of safety is not worth the potentialrewards you are missing by buying deeply
undervalued securities.
Wayne PiersonChief Compliance Officer
Clifford Capital Partners
”
“
Degrees in anthropology, psychology, philosophy and law arenot the common backgrounds of asset managers.
For Naylor & Company, the unique background of brothersChad and Dave provides a distinct advantage.
"We view ourselves as serving the niche market out therethat appreciates a different perspective," says Chad, who found-ed the company in 2003 and was joined later by Dave, whoserves as portfolio manager.
"We are insulated from a certain kind of groupthink thatcould be misguiding Wall Street in general. We are very fortu-nate in that regard," Dave added.
Starting with an investment partnership with some friendsand colleagues in the late 1990s, Chad spent five years honinghis value investing philosophy, including avoiding the dot-combubble. That led to him deciding to pursue asset management in2003 with a philosophy centered around investing in thestrongest companies at attractive prices in out of favor indus-tries that serve a fundamental consumer need. "We know it iscoming back because it fits a fundamental need," Chad said.
Chad said because of their backgrounds, the initial focus wasensuring they could prove the philosophy and provide goodreturns to investors.
"Those first basically 10 years, it was all about researchingthese companies, proving we can do this," he said.
The all-cap strategy, which has a focus on mid-cap compa-nies, holds about 35 stocks, with the top 10 positions represent-ing more than 50% of the portfolio and 80% of the portfolio inroughly 4 to 6 industries.
"We want to look into industries that are out of favor but usu-ally at the beginning phases of recovery," Chad said. "We wantto see clear signs of a recovery so we know we are getting intocompanies that we believe are moving upward."
He explained that a market downturn can also benefitinvestors as the industry often emerges with stronger compa-nies.
"One of the benefits of doing this is that when you have anindustry that goes through a downturn, the strongest competi-tors streamline their operations so when a recovery comes theprofit margins are going to be good, they have been forced to bedisciplined and streamlined to survive the down and also a lotof competition has been eliminated," he said, citing the airlineindustry in 2011 as an example.
Overall, the firm has approximately $26 million in assets,including $21 million in the strategy.
The San Francisco-based firm has recently begun marketingits strategy and believes the strategy will be attractive to theemerging manager-of-managers space.
The strategy's returns should certainly help. Since inceptionon April 10, 2003, the strategy has returned 19.5% gross of feesthrough Dec. 31 and has 1-, 3- and 5- year returns of 20.2%,43.7% and 28.9%.
"We didn't just benefit from three years of going up in ener-gy or something like that," Chad explained, noting that the firmhas 40 companies it has invested with that have more than dou-bled. "We have proven it."
March 2015 Emerging Manager Monthly Page 8
Naylor Brings Unique Backgrounds To Institutional Marketplace
Grow Your Assets Now South Avenue Investment Partners has the expertise and
ambition to grow your assets under management. We have raised over $1 billion for emerging managers.
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(310)424-5757South Avenue Investment Partners is a Registered Investment Advisor and a member of the MSRB.
We want to look into industries that are out of favor but usually at the beginning phases
of recovery. We want to see clear signs of a recovery so we know we are getting
into companies that we believe are moving upward.
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”
“
Check out our Web sitewww.emergingmanagermonthly.com
throughout the month for news on search leads.
TerraCap Partners haslaunched its third real estatefund, a value-add commer-cial real estate fund.
The fund, TerraCapPartners III, is an evolutionfor the firm, which has suc-cessfully raised and investedtwo prior funds that werefocused on opportunisticreal estate investments.
Steve Hagenbuckle, man-aging partner of TerraCap,said the fund will focus onvalue-add, commercialincome producing propertiessuch as Class A and B officespace, industrial warehouses and multi-family residences.
The fund will also see an expansion of the firm's geographicfootprint to the Southeast region including cities like Charlotte,Atlanta, Charleston and Raleigh, with its prior focus on Floridaremaining a heavy component of the overall portfolio.
"We focus on secondary markets where the populationgrowth has been sustained and continues to be sustained," hesaid, adding that along with not focusing on the primary mar-kets, the investment deal sizes are an ideal fit for a fund of itssize.
"We focus on deals that are between $5 million and $25 mil-lion. It is below (the large fund minimum investment) thresholdbut it tends to be too big of deals for a lot of local country clubbuyers," he said.
The fund is targeting a $250 million close, with roughly 30to 35 investments.
Already, several institutions have signed on to the fund,includling the Chattanooga (Tenn.) General Pension Plan,which committed $3 million to the fund last month and theMemphis Light, Gas and Water Division Other PostEmployment Benefit Trust, which committed $10 million to thefund in November.
"There is a general perception that the real estate market iswell on its way to recovery and that there are not as manyopportunities out there, and I would say that I am glad somepeople are thinking that way and taking their eye off the ballbecause there is still nice deal flow out there," he said.
March 2015 Emerging Manager Monthly Page 9
Alternative View A look at emerging alternatives managers
TerraCap Partners Launches Value-Add Commercial Real Estate Fund
Steve Hagenbuckle
Chicago-based emerging hedge fund investment managerCitrine Investment Group has launched its first fund, ManagingDirector Kunal Jerath said.
Citrine Value Fund, which launched last month, is anabsolute return long/short hedge fund focused on the real estatesector and includes exposure to publicly-traded real estate,financials, retailers, home-builders and other real estate-relatedsectors, Jerath said.
The firm itself was formed in May 2014 by Lynn Jerath, whoserves as majority owner and president of the firm, and DanielGreenberger, who serves as cio.
The two previously worked together at GEM Realty Capital.While at GEM, Lynn Jerath worked on the firm's private equityplatform and Greenberger worked on the hedge fund side ofthings.
Kunal Jerath focuses on non-investment related functionssuch as marketing and operations, which allows Lynn Jerathand Greenberger to focus on investing in the strategy, whichwill have a concentrated long portion and a diversified shortportfolio.
"The reason we are launching with this strategy is to havethe ability to go both long and short real estate as asset pricescontinue to climb. There are very few hedge funds focusedpurely on real estate," Jerath said. "They (Lynn Jerath andGreenberger) have the expertise to achieve attractive returnswith such a product."
Jerath noted that Citrine has received positive feedback fol-
lowing meetings with a variety of investors from high-net-worth individuals to family offices and institutions. While manyof those meetings for a first-time fund are introductory innature, Jerath said the firm has been pleased with the response.
In addition to hitting an underserviced sector with the fund,Citrine also believes that being a woman-owned manager in thespace provides an advantage.
"Likewise, there are very few institutional quality hedgefunds in the market run by women," Jerath said. "We hope toengage institutions looking to allocate money to women- andminority-owned firms."
Citrine Launches Long/Short Fund Focusing On Real Estate Sector
The reason we are launching with this strategyis to have the ability to go both long and shortreal estate as asset prices continue to climb.
There are very few hedge funds focused purelyon real estate.
Kunal JerathManaging Director
Citrine Investment Group
”
“
Algonquin Capital Corporation has launched an alternativefixed-income strategy.
The Algonquin Debt Strategies Fund, a long/short fundinvesting primarily in investment grade corporate debt, looks toprovide a strategy that overcomes the limitations of today'sfixed-income markets.
"After 30 years of interest rates trending downwards, we nowsit at historic lows. This poses two significant challenges for tra-ditional fixed-income investing: The low rate environmentmakes it difficult to generate adequate returns and an increase inrates could lead to material losses," said Raj Tandon, foundingpartner and head of business development. "Given the limitedupside and significant downside risks in traditional long-onlyproducts, today's markets call for an alternative."
The Toronto-based firm was founded by President BrianD'Costa, former global head of fixed-income and rates forCIBC, CIO Greg Jeffs, former executive director of corporate
bond trading for CIBC, and Tandon.The firm's investment process centers around dividing out the
two parts of a corporate bond in order to evaluate the risks inde-pendently, which allows the team to hedge out one component ifthere isn't an attractive opportunity while applying modest lever-age to the attractive component.
"From our perspective, what we are able to do that your tra-ditional bond managers don't have the tools to do is separate thatinto the interest rate component and credit component," Tandonsaid.
The firm currently has approximately $10 million in assetsunder management. Because the fund was just launched, the ini-tial focus will be on high-net-worth investors, however the firmdoes hope to begin to access smaller institutions and familyoffices that would engage with the firm as it builds its trackrecord. "Obviously, if we have the opportunity to get into insti-tutional investors at this point, we would love that," Tandon said.
March 2015 Emerging Manager Monthly Page 10
Algonquin Capital Launches Alternative Fixed-Income Strategy
Validea Capital Management has launched a new exchangetraded fund comprised of 10 active equity factor-based modelscreated from the methodologies of legendary investors such asWarren Buffett, Peter Lynch and Benjamin Graham.
The Validea Market Legends ETF (VALX) is designed offcomputerized models the firm has created based on theinvestors' fundamental approaches.
The firm currently manages approximately $650 million inassets based on an investment process that incorporates modelsfrom various famous investors that have openly disclosed theirstock selection methodologies in either books or academic
papers, according to Justin Carbonneau, a partner at the WestHartford, Conn.-based firm.
"A key requirement that we have is we are looking for strate-gies with long term records of outperformance," he said.
For the ETF, the 10 independent models each select the top10 securities, resulting in 100 holdings in the portfolio that areequally weighted at the outset.
Carbonneau said that by combining the 10 different models,some with a value or growth bias, others focusing on differentcapitalization levels, the fund is able to balance out the overallvolatility of the market.
Validea Capital Management Launches Market Legends ETF
WHV Investments has launched a new unconstrained, oppor-tunistic multi-credit strategy that is sub-advised by AcuityCapital Management.
The new fund, WHV/Acuity Tactical Credit Long/Short Fund,will consist of corporate fixed-income securities in areas such ashigh-yield, investment grade, convertibles and bank debt andintends to utilize relative value, event-driven and special situa-tion investment styles.
"Acuity has a thorough investment evaluation process and a
legacy of experience in corporate credit investments that, frankly,is unmatched in the space. Their attention to risk managementand focus on hedging is comprehensive, as well. We think this isgoing to be a great option for portfolio diversification and capitalpreservation," WHV CEO Andrew Turner said, in a statement.
San Francisco-based WHV is a multi-boutique asset manage-ment firm, while Acuity is a Greenwich, Conn.-based alternativesfirm focusing on corporate credit investing with approximately$171 million in assets under management.
WHV Launches Opportunistic Credit Fund With Acuity Capital Mgmt.
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Hedg e Fund participant
REQUEST FOR PROPOSAL
The State UniversitiesRetirement System (SURS) is seeking proposals from qualified firms to provide
hedge fund-of-funds investment management
services.
The RFP will be available atwww.surs.org/rfp on or around
March 9, 2015.
The University of California will search for emerging absolutereturn managers for its approximately $8.3 billion endowmentand $52.8 billion retirement plan, according to documents fromits Feb. 20 committee on investments meeting.
Spokeswoman Shelly Meron was unable to provide furtherinformation to EMM sister publication Nonprofit News regard-ing the search or the fund's definition of emerging managers,but directed interested firms to contact the office of the cio.The office can be reached via e-mail at [email protected].
The University of California has typically defined emergingmanagers as newer, independent firms that generally have lessthan $2 billion in assets and track records of less than fiveyears, according to documents from the California StateTeachers' Retirement System, the only such document publiclyavailable that references the university's policies on emergingmanagers.
The documents can be viewed on CalSTRS' Web site( h t t p : / / w w w. c a l s t r s . c o m / s i t e s / m a i n / f i l e s / f i l e -attachments/the_challenge_of_creating_a_successful_emerg-ing_real_estate_manager_program_crosswater_realty_advi-sors.pdf).
The university's investment policy statements do not specif-ically cite emerging investment managers.
Emerging managers can also include, but are not limited to,minority-, women- and disabled veteran owned organizations,according to the documents.
The university's absolute return portfolio totaled $1.9 bil-lion in its endowment fund and $3 billion in its retirement planas of Dec. 31.
The portfolio currently consists of 30 external managers andis overseen by Managing Director Lynda Choiwith assistancefrom Investment Officer Craig Huie.
University of California To SeekEmerging Absolute Return Mgrs.
The $180 billion New York State Common Retirement Fund hiredLeading Edge Investment Advisors to manage approximately $400million in a new domestic small-cap equity emerging manager-of-managers portfolio, State Comptroller Thomas DiNapoli announcedlast month.
The plan said the hiring of LEIA is part of an effort to commit anadditional $1.2 billion to its emerging manager program. The hireconcludes a search for a small-cap emerging manager-of-managersthat was initiated last year (EMM, 3/6).
"Leading Edge Investment Advisors is honored to be selected bythe New York State Common Retirement Fund as a partner in iden-tifying and providing opportunity to talented emerging managers,"LEIA President and CEO Clayton Jue said, in a statement. "We com-mend Comptroller DiNapoli for the Fund's vision and commitmentto utilizing emerging managers to deliver strong diversified sourcesof investment return to the Fund's beneficiaries."
Jue said in an e-mail to follow-up questions that the portfolio willbe diversified across value, core and growth styles and that it shouldbe up and running and fully funded in the second quarter. Juedeferred further questions seeking a more specific breakdown of theportfolio to the plan, which was unable to provide additional detailsby press time.
The plan's $1.2 billion commitment to the emerging manager pro-gram also includes an additional $500 million allocation to ArtemisReal Estate Partners for real estate investments as well as an addi-tional $300 million allocation to Bank of America Merrill LynchCapital Access Funds for private equity investments, according toDiNapoli. The investments now bring the plan's total emerging man-ager program commitments to more than $5 billion.
"The emerging manager program increases our access to invest-ment opportunities and broadens the pool of talented investmentmanagers who want to do business with the state pension fund,"DiNapoli said, in the statement. "The recent $1.2 billion in commit-ments to the program will help strengthen the Fund's overall invest-ment strategy on behalf of the more than one million members andbeneficiaries of the Retirement System."
According to the RFI, the plan is seeking information from direct pri-vate equity managers and is not interested in fund-of-funds, SBICfunds, BDC funds, direct lending funds, funds denominated in cur-rencies other than U.S. dollar or placement agents.
A copy of the RFI is available on the plan's Web site(http://www.ctpf.org/general_info/rfps/rfi_privateequity2015.pdf)and the deadline for proposals is March 11.
Questions or inquiries regarding the RFI should be directed toKelsen via e-mail at [email protected].
March 2015 Emerging Manager Monthly Page 12
Search leads and updates from the emerging manager space$$E A R C H E SE A R C H E S
NY Common Hires LEIA ForSmall-Cap MoM Portfolio
CHICAGO: RFI Seeks Direct PEContinued From Page 1
ISBI Hires 2 Emerging Hedge FoFTo Handle $150 Million
March 2015 Emerging Manager Monthly Page 13
Ill. TRS Adds Global Macro Fund
St. Louis Makes Large-Cap Hires
The $44.7 billion Teachers' Retirement System of Illinois approveda new emerging manager program investment last month,Spokesman Dave Urbanek confirmed, in an e-mail.
The plan approved an initial $50 million commitment to globalmacro manager Quadratic Capital Management through its emergingmanager program at its Feb. 18-19 meetings.
The initial commitment to the woman-owned firm includes thepotential for additional commitments that could total as much as$100 million for investment opportunities in absolute return strate-gies.
The plan works with general investment consultant RVK andhedge fund consultant Albourne.
The $15.1 billion Illinois State Board of Investment has hiredtwo hedge fund-of-funds to handle a total of $150 million to beinvested with emerging manager hedge funds, ExecutiveDirector Bill Atwood said.
The plan hired Rock Creek Group to manage $100 millionand Appomattox Advisory to handle $50 million at a specialboard meeting on Feb. 6. The other finalist in the search wasAurora Investment Management. The hires were first reportedby EMM on Feb. 9.
The three firms presented to the plan at its Dec. 5 emergingmanager committee meeting however a selection was deferredto last week's meeting as the board needed answers to follow-up questions (EMM, 1/7).
Atwood said the plan felt both Appomattox, which is awoman-owned firm, and Rock Creek, which already managesa hedge fund-of-funds portfolio for the plan, were both com-pelling options.
The two fund-of-funds will be invested primarily inlong/short equity strategies, with some credit and global macrostrategies also included, Atwood said.
The plan began a search for hedge fund-of-funds to handlean up to $150 million emerging manager portfolio in June(EMM, 6/19).
General investment consultant Marquette Associates assist-ed.
-Request For Information-
New York State Insurance FundDOMESTIC SMALL CAP EQUITY
New York State Insurance Fund (“NYSIF”) is seeking one or more firmsfor active domestic small capitalization equity management; value,
core, and growth investment styles will be considered. NYSIF reservesthe right to make single or multiple award(s) based on an absoluteand/or relative (by investment style) evaluation of the product uni-
verse.
Interested firms can find search details on the NYSIF website at:http://ww3.nysif.com/AboutNYSIF/ProcurementInfo.aspx, beginningFebruary 11, 2015. Candidates should check this website frequently.
Addenda, and/or any other information relative to this search, will beposted to the NYSIF procurement webpage. Your information submit-
ted via the eVestment website will be evaluated beginning with theminimum qualifications posted on the NYSIF procurement webpage.
Note that the eVestment database will be utilized for analysis ofproduct data. During this initial phase there are no other documentsor materials that need to be submitted other than the data entered
into the eVestment database.
Please make sure that any firm and product information you submit isfully updated in the system with 12/31/2014 data. Please visit
www.evestment.com to enter your data. It is critical that all data fields(including all applicable historical data) are completed in order to fully
comply with the search process.This includes, but is not limited to: investment return series, character-istics data, description of methodology, firm data and product assets
under management breakdown. To be considered for this search,your firm must have its data submitted in eVestment by 03/06/2015.
SINGLE POINT OF CONTACTUntil a candidate(s) is selected and the selection is announced by
NYSIF via its webpage, candidates are only allowed to communicatewith NYSIF and RVK, Inc. (“RVK”) via the designated RVK email
(below). Any unauthorized contact may disqualify the candidate fromfurther consideration (NY State Finance Law Sections 139-j and 139-
k). Do not contact eVestment for specific details of the search.
Prospective candidates shall direct all questions for this search elec-tronically to NYSIF and RVK to the following email address:
The $780 million St. Louis Employees Retirement System hashired an emerging domestic large-cap core equity manager andapproved a separate large-cap growth investment with anotherfirm considered in the search, Pension Fund Manager DeniseDroege said.
The plan approved the hire of TWIN Capital Managementat a Feb. 6 special board meeting to handle an emergingdomestic large-cap core equity mandate of approximately $7.5million, according to Droege. The firm was chosen followingfinalist interviews that also included Mar Vista InvestmentPartners, CT Mason and Quotient Investors.
Droege said the plan also approved a $5 million domesticlarge-cap growth equity investment with Mar Vista for its gen-eral portfolio.
According to Droege, the plan liked Mar Vista, but couldnot make an allocation to the firm in its emerging managerportfolio because its assets under management had grownbeyond its policy limit of $2 billion between the issuance ofthe RFP and the Feb. 6 finalist interviews. Mar Vista hasapproximately $2.3 billion in assets under management as ofDec. 31, according to eVestment.
The search was narrowed to the four finalists last monthfrom a total of 19 responses to an RFP that was originallyissued in the summer (EMM, 9/3).
General investment consultant Summit Strategies Groupassisted.
The $17.3 billion State Universities Retirement System of Illinoishired Progress Investment Management Company to handle anemerging market debt manager-of-managers portfolio and isexpected to hire an emerging real estate fund-of-funds this month,CIO Dan Allen said.
Progress will receive $65 million to invest in underlying women-, minority- and disabled-owned firms. Allen said the plan wasattracted to creating a seeding opportunity due to the minimalresponses received from emerging managers in a search initiatedlast year. Progress did not respond to a call seeking the names of thefirms that will receive an allocation.
The hire was part of an overall $520 million allocation to emerg-ing market debt that also included the hires of blended managersBlueBay Asset Management and Prudential InvestmentManagement and local currency manager Colchester GlobalPartners.
The plan has also opted to split its current $100 million non-corereal estate manager search into two stages, with the first stage look-ing to invest in a fund-of-one structure that will invest in emergingmanagers. The plan would look to invest a total of $90 million, withthe commitment available in $30 million increments over the nextthree years.
Allen said the plan has selected Franklin Templeton Investments,Grosvenor Capital Management and Oak Street Real Estate Capitalas finalists and will consider the firms at its March 12 meeting.
The plan will then look to invest $70 million in a direct non-corereal estate manager, with hire recommendations likely at the Aprilor June meeting, Allen said.
The additional $60 million being allocated to the emerging man-ager fund-of-one will be pulled from the 2016 and 2017 pacingschedule.
The plan began the non-core real estate manager search inSeptember and received 64 responses, including 12 from funds-of-funds.
Illinois SURS Makes EMD Hire; ToAdd Emerging RE Fund-of-Funds
March 2015 Emerging Manager Monthly Page 14
St. Louis Schools Eyes GlobalEquity Emerging MoM Hire
The $4.6 billion Philadelphia Public Employees RetirementSystem is looking to make investments in diverse, emergingand local equity and fixed-income managers.
The plan last month issued an RFP for managers that wasdue on Feb. 27, as reported by EMM on Feb. 13.
The search was open to domestic and international equitymanagers and fixed-income managers, with no specific styles,capitalizations, credit ratings or issuers noted.
The plan defines an emerging manager as a firm with totalassets under management of less than $2 billion and at least$100 million.
A local firm must have an established office located inPhiladelphia and meet the requirements of Section 17-109 ofthe Philadelphia Code.
A diverse manager is defined as minority-, woman- or dis-abled-owned.
Director of Investments Christopher DiFusco declined toprovide additional details on the search, including any poten-tial mandate sizes.
The plan issued a similar RFP for diverse, emerging andlocal domestic equity and fixed-income managers in 2013 aspart of a transition to direct managers from a fund-of-fundsstructure.
The $910 million Public School Retirement System of St.Louis' investment committee approved a recommendation tohire a global equity emerging manager-of-managers late lastquarter, board meeting materials indicate.
The committee approved a recommendation to hireProgress Investment Management Company to handle a 5%global equity emerging manager-of-managers portfolio at itsDec. 18 board meeting, according to meeting minutes.
The recommendation was approved following Novemberpresentations from Progress, Attucks Asset Management andFIS Group (EMM, 1/7).
The recommendation is subject to approval from the fullboard, which was scheduled to meet on Feb. 23 and last held ameeting on Dec. 15.
Further information on the recommendation is unavailableas Executive Director Andrew Clark did not return a call seek-ing additional details.
According to the Dec. 18 minutes, the emerging manager-of-managers portfolio will be partially funded through the ter-mination of domestic large-cap core equity managerBatterymarch Financial Management, which is also subject tofull board approval.
The plan approved a 5% target to global equity in 2013 aspart of a new asset allocation, however, it is unclear from theminutes if the emerging manager-of-managers portfolio fillsthat target allocation.
General investment consultant NEPC assisted.
Philly Eyes Diverse, Local &Emerging Equity, Bond Managers
Search RoundupThe following directory includes search and hire activity for the last month, as well as previously reported ongoing searches. The chart also
includes emerging managers hired for direct investments. All amounts are in $ millions unless otherwise stated.Powered By:
For further information on finsearches’ daily search leads and mandates awarded and lost, please visit finsearches.com or contact Gene Dolinsky at 646-810-1072 or [email protected]
FUND NAMEFUND
SIZE (M)
INVESTMENT
TYPE
SIZE
(M)COMMENTS
NEW LEADS
Public School Teachers'
Pension & Retirement Fund of
Chicago,
10,800Private Equity
Fund-of-Funds/N/A
Plan has issued an RFI for direct minority-, women- and disabled-owned private equity
managers. Plan is currently working with general investment consultant Callan
Associates on a private equity pacing plan and will use the RFI to see if the field of
managers is deep enough to warrant the issuance of a full RFP in the future. A copy of
the RFI is available on the plan’s Web site
(http://www.ctpf.org/general_info/rfps/rfi_privateequity2015.pdf) and the deadline for
submissions is March 11.
ONGOING
Public School Teachers'
Pension & Retirement Fund of
Chicag0
10,800Small-Cap
Growth106
Plan is still considering a search for a minority domestic small-cap growth equity
manager to handle an approximately $106 million mandate, however there is no
timeframe for the search to be conducted. Further information is unavailable at this
time. Plan first approved search in 2012.
Los Angeles City Employees'
Retirement System13,900
Emerging
Managers-of-
Managers
N/A
Plan received board approval at its Feb. 10 meeting to relaunch its domestic small-cap
emerging manager-of-managers search at the end of this year, according to minutes.
Plan conducted original search in June as part of a refocusing of its emerging
manager-of-managers to small-cap from mid- to large-cap equities but did not make a
hire after initially selecting Capital Prospects as the sole semi-finalist. An exact
timeframe for the relaunch of the search was not provided.
City of Stamford Policemen's
Pension Trust197
Emerging
Managers10
Outsourced cio Clearbrook Global Advisors did not make a recommendation on how
to allocate up to 5% of assets to an emerging manager program at its Feb. 10 board
meeting due to time constraints. Plan may receive recommendation at its March 10
board meeting. Plan first discussed the possibility of allocating up to 5% of assets to
an emerging manager program at its Dec. 17 meeting.
FIRMS HIRED
Illinois State Board of
Investment15,000
Hedge Fund-of-
Funds150
Plan hired Rock Creek Group to manage $100 million and Appomattox Advisory to
handle $50 million in emerging hedge fund-of-funds portfolios at a special board
meeting on Feb. 6. The other finalist in the search was Aurora Investment
Management.
New York State Common
Retirement Fund180,000
Emerging
Manager-of-
Managers
400Plan hired Leading Edge Investment Advisors to manage approximately $400 million
in a new domestic small-cap equity emerging manager-of-managers portfolio.
St. Louis Employees
Retirement System780
Large-Cap
Core8
Plan approved the hire of TWIN Capital Management at a Feb. 6 special board
meeting to handle an emerging domestic large-cap core equity mandate of
approximately $7.5 million. Firm was chosen following finalist interviews that also
included Mar Vista Investment Partners, CT Mason and Quotient Investors.
Teachers' Retirement System
of Illinois44,500
Absolute
Return50 Plan made $50 million commitment to global macro manager Quadratic Capital
Management in emerging manager program. Plan could potentially increase total to as
much as $100 million.
FIRMS TERMINATED
Detroit Police & Fire
Retirement System3,386
Emerging
Manager16
Firm terminated emerging domestic fixed-income manager Ambassador Capital
Management at its Nov. 20 meeting due to the firm's decision to discontinue service.
Funding was slated for payment of pension obligations.
Los Angeles City Employees'
Retirement System13,900
Emerging
Manager-of-
Managers
114
Plan approved terminations of emerging managers-of-managers Capital Prospects
and Progress Investment Management Company at its Feb. 10 board meeting for
performance reasons. The plan will transfer Capital Prospects' $45 million mandate
and Progress' $69 million mandate to an existing Russell 2000 Index fund managed by
RhumbLine Advisers.
March 2015 Emerging Manager Monthly Page 15
Robert Noe has been named head of manager research at invest-ment consulting firm Wilshire Associates, Spokeswoman KimShepherd said, in an e-mail.
Noe, previously a v.p. and member of the managementresearch group at the firm, replaces Mannik Dhillon, who left thefirm at the end of January to take a senior role with an unnamedinvestment management firm, Shepherd said.
Further information on Dhillon’s new employer was not avail-able.
Noe joined Wilshire in 2011 and was previously an investmentanalyst and consultant with Aon Hewitt and EnnisKnupp with afocus on global and international equity managers, Shepherdsaid.
Anastasia Titarchuk has been promoted to deputy cio at the $181.7billion New York State Common Retirement Fund, the planannounced.
Titarchuk had most recently been serving as the plan’s director ofabsolute return strategies and joined the plan in 2011 as an invest-ment officer in the space. She previously served as director of inter-national derivatives sales at Bank of America.
“Anastasia’s experience across the spectrum of assets classes isinvaluable as we continue to build on the gains we have made inrecent years and look for innovative opportunities that offer attrac-tive, risk-adjusted returns,” CIO Vicki Fuller said, in a statement.
The plan, which had not been utilizing a deputy cio, originallybegan a search for the position in August.
Spokesman Matthew Sweeney did not respond to an e-mail seek-ing comment on the promotion and whether the plan will have a newdirector of absolute return.
March 2015 Emerging Manager Monthly Page 16
bookBLACKLITTLE
Your guide to the gatekeepers and decision makers
New York Common RetirementNames Deputy CIO
Paul Mouchakkaa was named senior investment officer for realassets at the California Public Employees Retirement System,the $296.5 billion plan announced.
Mouchakkaa will manage a 60-member professional staffand is responsible for the implementation and management ofinvestment strategy and policy for the plan’s $29.6 billion realassets portfolio.
“Paul is a talented and experienced real estate professional,and we’re thrilled to have him on our team,” CIO TedEliopoulos said, in a statement. “He has a proven track recordof success and I’m confident that will continue at CalPERS. Ilook forward to working with Paul and welcome him to our sen-ior management team.”
Mouchakkaa joined the plan on March 2 and takes over theposition previously held by Eliopoulos before he was promotedto cio in September.
CalPERS Hires Real Assets SeniorInvestment Officer
The $10.8 billion Public School Teachers’ Retirement Fund ofChicago has named Charles A. Burbidge as its new executivedirector, the plan announced.
Burbidge, who most recently served as cfo of the AtlantaPublic Schools, takes up his new position on March 16. He hasalso previously held positions with the Los Angeles UnifiedSchool District, KPMG and Chicago Public Schools as well asserving as deputy cfo for Cook County (Ill.).
“Our trustees are confident Mr. Burbridge’s extensive, senior-level financial experience in both the public and private sectorswill be a valuable asset to the fund going forward,” BoardPresident Jay C. Rehak said, in a statement. “In addition, Chuck’sleadership and strong background working in Chicago and Illinoiswill help us navigate the many challenges and opportunities fac-ing the CTPF in the current pension fund environment.”
Interim Executive Director Peter Driscoll will remain with theplan until March 31 to ensure a smooth transition. Driscoll wasoriginally named interim executive director following the Dec. 31resignation of Kevin Huber, who had taken a leave of absence formedical reasons earlier in the year.
With a permanent executive director in place the plan is nowexpected to initiate a search for its cio position, which has beenopen since Dec. 1 following the departure of Carmen Heredia-Lopez, who joined the W.K. Kellogg Foundation.
The plan had also initiated a search for a deputy executivedirector prior to Huber’s resignation. Further information on thecio and deputy executive director searches is unavailable at thistime as a fund spokesman did not respond to an e-mail by presstime.
Chicago Teachers NamesExecutive Director
Mary Mussett and Stephanie Beranek have joined investmentconsulting firm Marquette Associates as senior client analysts,according to a quarterly update provided by the firm to one of itsclients.
Beranek joins the firm from BMO Private Bank where sheserved as an investment management analyst while Mussett mostrecently worked as an investment officer in the WealthManagement Group at Northern Trust, according to the firm’sWeb site.
Both Beranek and Mussett’s LinkedIn profiles show theyjoined the firm in November.
Further information on the hires was not provided and a call toChief Administrative Officer Karissa McDaniel was not returned.
Marquette Adds Two Analysts
Wilshire Names New ManagerResearch Head
March 2015 Emerging Manager Monthly Page 17
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BNP Paribas Investment Partners has appointed four seniorglobal equity managers to build a new institutional global equi-ty team, the firm announced.
Simon Roberts has been named head of the global equityteam and Jonathan Barnett, James Mann and Stewart Lamberthave been appointed senior portfolio managers, the firm said.
The team will be based in London and report to Guy Davies,director of equities.
Most recently, Roberts served as head of global equities,Barnett and Mann served as portfolio managers and Lambertworked as a trader at NewSmith Capital Partners.
An e-mail to NewSmith was not returned.
BNP Paribas Adds 4 To BuildInstitutional Global Equity Team
Salient Partners will acquire investment manager ForwardManagement, Salient announced.
The transaction will result in a combined company led bySalient’s senior management team with Salient Chairman andCEO John Blaisdell, Salient CIO Lee Partridge and Forward COORob Naka all retaining their roles at the new company, the firmsaid.
Forward, a San Francisco-based independent, privately-heldasset management firm and investment advisor to the ForwardFunds, will continue to operate from its office and continue itsinvestment approach and processes, Houston-based Salient said.Both Forward and Salient’s portfolio management teams willreport to Partridge. Salient Partners expects nearly all of Forward’semployees will continue serving in their current roles.
The acquisition will accelerate Salient Partners’ growth as a liq-uid alternatives asset management firm, enhance the firm’s suite ofinvestment strategies and expand its corporate footprint to includemore than 250 employees across Houston, San Francisco and NewYork, the firm said.
Salient and Forward will combine their mutual fund offeringsinto a suite of funds that will include global asset allocation, realasset investments, diversifying alternative investments, focusedequity investments and fixed-income and credit investments.
The transaction, which is expected to close in the second quar-ter, will result in a combined firm that has more than $27 billion inassets under management and advisement. Terms of the transactionwere not disclosed.
“We are thrilled to unite with Forward in this transformationalpartnership. Our goal is to help investors focus on what truly mat-ters—cost-effective investment strategies that seek to providediversification in uncertain times,” Blaisdell said, in a statement.“The combined platform will add scale, reach and depth to allareas of our business, helping us support institutional investors andfinancial advisors nationwide.”
Salient To Acquire Forward
Sanjay Chawla will become cio of Raytheon Company thismonth, Spokesman Mike Doble said.
Chawla, who was also named v.p. of pension investments,will take over the cio responsibilities this month from RichardGoglia, v.p., cio and treasurer of Raytheon, who is retiring,Doble said.
Chawla is responsible for leading Raytheon’s pensioninvestments team, managing pension assets, implementing anddeveloping investment strategies and overseeing all assets inemployee benefit plans, the firm said.
The company is in the process of reviewing potential succes-sors for the treasurer role and expects to announce a hire with-in the next few months, the firm said. Chawla will report to thenew treasurer.
Chawla joined Raytheon in 2013 as director of pensioninvestments. He will retain his responsibilities from that posi-tion, Doble said.
Raytheon Company Names V.P. ofPension Investments & CIO
Mercer has appointed Dave McMillan as cio of hedge funds andStephen Ewen as deputy cio of hedge funds, SpokeswomanAlayna Francis confirmed, in an e-mail.
McMillan and Ewen are responsible for leading the team thatoversees the firm’s hedge fund programs in North America aswell as assisting in the firm’s hedge fund research effort,Francis said. Both professionals are based in St. Louis and bothpositions are newly-created.
Prior to their new positions, McMillan served as director ofhedge funds at Mercer and Ewen served as a principal focusedon hedge fund investments and research for the firm.
McMillan reports to Global CIO of Alternatives BillMuysken and Ewen reports to MacMillan, Francis said.
“We created these roles as part of our ongoing commitmentto reinforce the value we deliver to our hedge fund clients,” saidRich Nuzum, head of investments for North America, in a state-ment. “As interest in delegated solutions has risen over time,we have expanded our capabilities to complement our worldclass research. We have taken consistent and strategic steps tohone our team, our expertise and the services we provide to ourhedge fund clients, and we fully expect to continue this upwardtrajectory.”
While McMillan and Ewen retain most of their responsibili-ties from their prior roles, they will no longer be involved ingeneral hedge fund advisory work or managing the broaderhedge fund team globally, Francis said. Jelle Beenen, globalhead of alternatives research, will take on these responsibilities.
Mercer Names Hedge FundProgram CIO & Deputy CIO
