NEWS

Louisiana Teachers commits to an international small cap equity manager

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.