US - BlackRock is set to lose assets it oversees for the $42.9bn Massachusetts state pension fund over fears the firm is not adequately focused on some fixed-income markets.
The pension's board voted unanimously today to shift about $1bn invested in BlackRock's actively managed bond portfolio to its passive fixed-income fund pending an asset- allocation review and finding a new manager.
BlackRock manages $3.6bn for the plan, including $1.3bn already in the passive fund and a similar amount in inflation-protected securities, according to a memo released at a board meeting.
There's been a "diminished emphasis on core fixed income" at New York-based BlackRock, which the state hired in 1999, the plan's investment committee said in the memo to the Pension Reserves Investment Management Board, or PRIM. "PRIM staff lacks confidence that the firm is adequately focused," the memo said. It estimated a fee savings of $1.1m a year.
Laurence D. Fink helped start BlackRock in 1988 as a fixed- income investment firm. It has grown through a series of acquisitions, including Barclays Global Investors a year ago. The firm had $3.45trn of assets under management at the end of the third quarter, up from $165bn in 1999, the state memo said.
"BlackRock has had considerable high-level turnover over the last three years" in its bond group, further undermining the state's confidence, the memo said. Scott Amero stepped down in January as co-head and chief investment officer of the firm's fixed-income division. In August, Curtis Arledge, the deputy head of fixed income, left for Bank of New York Mellon Corp.
"Mass. PRIM is a valued client and we're pleased they chose BlackRock's Passive Core Bond Strategy while evaluating alternatives to the Active Core Bond account," Brian Beades, a BlackRock spokesman, said in an e-mail.
State pension officials met with Peter Fisher, BlackRock's head of fixed-income, twice, including on Nov. 2 in the plan's Boston headquarters, and he failed to dissuade them from seeking a new manager, according to the report. The firm's active core fixed-income portfolio has trailed its benchmark, the Barclays Capital U.S. Aggregate Index, in the past three-, five- and 10- year periods, according to the memo.
The BlackRock fund gained 5.48% over the past five years while the Barclays index returned 6.2 percent, the memo said. For the calendar year through September, it trailed by just 0.01 percentage point, at 7.93% to 7.94%, according to the memo.
"Our active core bond strategy has shown marked improvement since the end of 2008," Beades said in another e- mail. "We have continued to enhance our fixed-income platform globally -- including the hiring of a number of senior investment professionals this year alone."
Standard Life has increased exposure to risk assets in three out of five funds in its Active Plus and Passive Plus workplace pension ranges.
Some 48% of employers are unaware of the services or help they offer to members of their defined contribution (DC) schemes, according to Aon.
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