US - The Fresno County Employees' Retirement Association (FCERA) has decided not to put Oechsle International Advisors on watch, despite its international mandate having underperformed its benchmark in the one, three and five-year periods.
Oechsle's diversified international equity strategy for FCERA underperformed the MSCI EAFE index by 2.4% percentage points in the year ended 30 June, 0.1 percentage points in the three year, and 1 percentage point in the five year period.
The firm's underperformance is due to the poor performance of high quality stocks in 2009 compared to lower quality stocks, Wurts Associates senior consultant Jeffrey MacLean told trustees at a board meeting last week. Oechsle's high-quality portfolio also includes a 40% exposure to Europe, 25% to Japan and 20% to financials, which all hindered returns.
He said: "After the financial crisis stocks bounced up significantly, but a lot of them were lower quality stocks. They were stocks that were driven down to near zero and then came substantially off their bottoms. Those are not the kind of stocks Oechsle owns."
MacLean described their underperformance as "not dramatic".
"Our belief is that this manager does have skill, has underperformed for some legitimate reasons and therefore does not warrant a watch recommendation at this time. That's our judgement, based on our analysis of the manager, our conference call and our collective experience as a firm."
Oechsle ran $225m as of June 30, but received an additional $42m in assets last month as part of a rebalancing that saw the $2.9bn pension fund decreasing its exposure to Treasury Inflation Protected Securities. FCERA also increased its exposure to high yield debt and international equity. (Global Pensions, 06 September 2011)
FCERA reduced its exposure to TIPS from 4.3% to 3%. The high yield allocation to Loomis Sayles, one of the scheme's two opportunistic fixed income managers was increased from 3.2% to 4%, while international equity was increased to the policy target of 15% after an additional $45m was given to Research Affiliates.
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