By Muskan Arora
The $26bn Teachers’ Retirement System of
Louisiana committed $300m to Wellington international small cap equity, due, in part, to
the poor performance of other managers on the roster.
The system allocates 1.1% or $287m to its
international small cap portfolio, as of March 31.
Existing managers on the roster
International small cap equity managers on
the roster include Mondrian Investment Partners Limited and Oberweis Asset
Management, Inc.
Mondrian holds 0.4% or $96m of the
international small cap portfolio, as of March 31.
The manager returned -1.7% against a
benchmark of 2.6% in the first quarter and 0.2% against the benchmark of 10%
for 1 year time period.
The system allocated 0.7% or $190m to
Oberweis Asset Management, as of March 31.
The manager returned 7.2% against a
benchmark of 2.6% in the first quarter and 9.6% against a benchmark of 10% for a
1-year time period.
Hiring Wellington Management Company LLP
The staff and consultant Aon presented
the board with options of either hiring both Driehaus (growth) and LSV (value)
with an allocation of $150m each or hire Wellington with an allocation of
$300m, at the July meeting.
The three finalists were Driehaus
International Small Cap Growth, LSV international small cap value equity and
Wellington international small cap research equity.
As Wellington is a core manager, it did not
require pairing.
“Fundamental, bottom-up investment approach
emphasizes security selection as each global industry analyst selects the most
attractive stocks from their research universe for the portfolio and makes
investment decisions in each sub-portfolio independently,” stated the meeting
materials presented by Aon, highlighting the strengths of Wellington.
The system rejected LSV owing to its “deep
value-oriented investment approach” which may experience underperformance
relative to benchmark for longer periods of time.
LSV’s strategy might struggle in narrow
markets and markets led by growth stocks.
In terms of rejecting Driehaus, the
consultant considered high portfolio turnover and the fear of strategy facing
“headwinds during periods in which value stocks outperform growth stocks.”
The portfolio returned 5.9%, -7% and 0.8%
for its 1, 3 and 5-year time period against a benchmark of 10%, -0.9% and 5.4%.
A few firms who had also responded to the
RFP include Allspring Global Investments LLC, Baillie Gifford and Goldman Sachs
Asset Management L.P among others.