US - The Oregon Public Employees' Retirement System has terminated T. Rowe Price from a US$750m international ex-US equity mandate.
Kevin Nordhill, head of equities, Oregon Investment Council, which manages the $49bn fund, said the decision to terminate after 10 years was the result of a change in investment strategy to allocate active briefs to managers taking higher risk. Oregon reallocated the money between several existing managers.Over a three-year period to 31 July, 2005, the Oregon mandate fell 87bp short of the MSCI All Country ex-US Growth index.
T. Rowe Price has been working hard this year to turn around its lacklustre international equity funds.
The international equity ex-US mandates for US institutions continue to be managed between three lead portfolio managers: Mark Bickford-Smith, David Warren who is the president of T. Rowe Price International and runs the Japanese portion and Dean Tenerelli who runs the European strategies.
Over a three-year period to end December 2004, T. Rowe’s global stock strategy ex-US returned 9.17% against an annualised benchmark return of 12.65%.
“It’s always been drip, drip on the downside quarter after quarter, but over time that adds up,” said one consultant, who declined to be named.
In 2003/2004 when equity markets rebounded, the strategy posted returns of 24.8%, but against an index return of 30.07%.
T. Rowe president and CEO, Todd Ruppert, acknowledged there had been performance issues, but said numbers were turning the corner. “Part of the reason we underperformed over that period was that we were growth orientated and we were in a value orientated market, but there were also some mistakes that we made and we have tried to learn from those,” he added.
T. Rowe is now focusing its attention on a global equity product that is likely to appeal to ex-US investors. Management of the fund, which has also suffered below benchmark performance over the long term, has now been centralised under former sector fund manager, Rob Gensler. Since April 2005 when Gensler assumed control of the fund, he has cut the number of securities from 250 stocks three years ago, to fewer than 100 stocks today.
Between April and August performance improved with the global stock fund returning 12.78% against a benchmark return of 5.41% for the MSCI All Country World Index.
This week's edition of Professional Pensions is out now.
Nearly 60% of UK employers consider defined contribution (DC) master trusts to be the "most suitable" pension fund for their employees, according to research by Buck.
Companies which have tried to dodge their pension duties by changing their identities are being "hunted" by The Pensions Regulator (TPR) in a crackdown on non-compliance with auto-enrolment (AE).
Removing liquidity restrictions would enable DC funds to capitalise on the potentially higher and safer returns that DB schemes have benefitted from, says Patrick Marshall.