The fund is also inviting managers with experience in managing MSCI Eafe index portfolios to submit proposals.
“We are in the process of looking for different ways to add value and as part of a normal review of the portfolio we are going asset class by asset class,” said Daniel Gallagher, chief investment officer at Lacers.
He explained that the review started last year with an assessment of the approach to private equity and real estate investments. “Then we went through the fixed income part and through US equities, and we are now in the middle of that.”
As a consequence of the searches, two short-duration fixed income managers have already been appointed and the fund is also evaluating proposals submitted for a corporate governance investment management strategy.
Lacers currently invests 45.6 per cent of total assets in domestic equities and 20.7 per cent in international stocks. The percentage dedicated to fixed income accounts for 26 per cent, with real estate representing 3.1 per cent and 4 per cent going to other alternative investments.
The fund’s target allocation would include a higher proportion to both real estate and alternatives, of 7 per cent each, and a small reduction in its equity exposure from the current 66.3 per cent of total assets to 58.1 per cent.
“We will continue to review our strategy although we might never get to that [target allocation], said Mr Gallagher.“The next step will probably include a look at Treasury inflation-protected securities and maybe some other products like a large-cap actively managed strategy.”
The fund’s portfolio returned 12.4 per cent in 2004, compared with the 25.82 per cent achieved in 2003 and the -7.69 per cent in the previous year.
“I think universally people have struggled, not last year, but during the three prior years with disappointing returns in the markets,” he explained. “We all have our actuarial targets that we have to meet and everyone is trying to figure out ways to get there.”
As market gets tougher, he added, finding strategies that actually can add value is becoming more difficult. “Keeping in mind that we are long-term investors, everyone is seeking to add some additional value, keep the cost down for the sponsors and make sure we have enough money to pay benefits.”
US small-cap value managers wishing to be considered for the mandate must submit applications by June 9. The deadline for those interested in submitting proposals for managing a MSCI Eafe index portfolio is June 3.
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