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Kansas Boosts Real AssetsThe Kansas Public EmployeesRetirement System has increased itsreal return allocation to 14% from 10%.

See story, page 6

In The NewsSawgrass Expands Client Service 2Watson Wyatt Adds Consultant 2

SearchesOrange County Seeks Real Estate 2Denver Ponders Portable Alpha 4Missouri Eyes Int’l Real Estate 4Chicago Water Studies Alts 4Nashville Preps 130/30 RFP 6

Marketing StrategiesGreen Manager Offers New Fund 8

PeopleApollo Grabs Pequot Marketer 8SSgA U.S. Bond Chief Departs 9Callan Loses Two Consultants 9Philly Picks Investment Officer 9

DepartmentsPlan Sponsor Profile 10Ask The Advisor 11News Recap 12Search & Hire Directory 13-18

JANUARY 28, 2008VOL. XXXIII, NO. 2

COPYRIGHT NOTICE: No part of this publication maybe copied, photocopied or duplicated in any form or byany means without Institutional Investor’s prior writtenconsent. Copying of this publication is in violation of theFederal Copyright Law (17 USC 101 et seq.). Violatorsmay be subject to criminal penalties as well as liabilityfor substantial monetary damages, including statutorydamages up to $100,000 per infringement, costs andattorney’s fees. Copyright 2008 Institutional Investor,Inc. All rights reserved. ISSN# 720-90190

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MARYLAND INCREASES ALTS, GLOBAL EQUITYThe State Retirement & Pension System of Maryland has increased its target allocations toalternatives, international and global equity. The fund raised its real return and privateequity targets to 5% each from 2%, real estate to 10% from 5%, global equity to 15% from10% and international equity to 18% from 15%, at a Jan. 15 board meeting. All moves arebeing funded by reducing domestic equity to 30% from 40% and fixed income to 17%from 28%, said John Greenberg, chief investment strategist. Following an asset study, EnnisKnupp + Associates recommended these changes to help achieve the fund’s 7.75% target

(continued on page 19)

Hedge Funds, Emerging Managers On RadarARKANSAS TEACHERS AIM TO TAME INFLATIONThe Arkansas Teachers Retirement System has carved out 5-6% allocation to inflation-hedging strategies, including timber, commodities, infrastructure and Treasury inflation-protected securities. Executive Director Paul Doane expects to start seeking managers in thefirst half of this year. So far, the $11.5 billion plan has less than 2% of its assets in timber andhas heard educational presentations on the other asset classes at recent board meetings. ATRSwill also hear presentations on hedge funds from Ennis Knupp + Associates and managers at


Nuveen To Raise ProfileANSON THROTTLES UP PRODUCT DEVELOPMENT, MARKETING Mark Anson intends to use his high profile and experience at the helm ofthe California Public Employees Retirement System and BT PensionScheme to attract pension fund clients for his new firm, NuveenInvestments. He is planning to launch investment strategies, hire salesprofessionals and spend more time with clients and prospects.


Eyes Stakes In GPsNEW JERSEY SEEKS EQUITYMANAGERS FOR $5-6BThe New Jersey Division of Investment plans to issue a$2 billion small-cap RFQ this month and another inMarch for $3-4 billion in international equities. The $81billion fund is also considering direct infrastructure deals, co-investments and funds to reach its target 2% infrastructure


Mark Anson

MML012808 1/24/08 6:11 PM

Money Management Letter www.moneymanagementletter.com January 28, 2008

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Watson Wyatt Adds ConsultantEmily Barger has joined Watson Wyatt Worldwide in Atlantaas an investment consultant, working with DB and DCcorporate retirement plans. She previously worked at HewittAssociates alongside Weston Tompkins, now leader ofinvestment consulting for Watson Wyatt’s Atlanta office.Barger left Hewitt to study for her MBA at The University ofNorth Carolina and has also worked in investment banking,at Wachovia and Cratos Capital Partners.

Barger’s position was created in response to rapid growth in the firm’s clientbase, said Tompkins. When he joined in August 2006 the Atlanta office had 30clients; it has since grown to 40.

Sawgrass Hires Client Service Exec.Sawgrass Asset Management has hired Gregg Gosch as its firstdedicated client service professional. He was a managing directorat Comsys, Inc., responsible for client relationship operations.“We’ve been growing very fast and we wanted to add real depthto our client service,” said Brian Monroe, director, sales andmarketing. “Our goal is to treat our clients like prospects.”

The Jacksonville, Fla., firm has grown to $1.8 billionunder management from $1.1 billion just over a year ago,

primarily in its large-cap growth equity strategy. “Sawgrass has done a great jobof client service, with sales and portfolio people having a lot of client face time,”said Gosch. “I’m hoping to let everyone focus more on what they’re great at.”

OCERS Seeks Real Estate ManagersThe Orange County (Calif.) Employees Retirement System will seek twocommingled core real estate funds to handle $46 million in aggregate. Trusteesapproved the search at a Jan. 22 meeting. CB Richard Ellis Investors and AmericaRealty Advisors handle $576 million in separate account real estate mandates.Over five years, all this money will be moved into open-ended commingled funds.The latter provide better liquidity and diversification, lower fees, less price volatilityand more transparency, according to the fund’s consultant, Callan Associates.

Separately, the $8 billion fund selected Schroder Investment Managementto handle $70 million in active commodities and Wellington ManagementCo. to manage $50 million in a Diversified Inflation Hedges strategy. The fundalso chose PIMCO to oversee $70 million in passive commodities and TheClifton Group for $130 million in a cash overlay strategy. These allocationsshould protect against inflation while achieving higher returns than Treasury-inflation-protected securities.

Schroders’ strategy uses top-down analysis and selects companies globallythrough fundamental and quantitative research. Wellington’s multi-asset portfolioinvests in commodities, inflation-linked bonds and global equities. PIMCO hasbeen managing money for OCERS for the past 25 years. The firm has a proventrack record, strong risk analysis and impressive client service, wrote InvestmentAnalyst Amit Thanki in a memo. The Clifton Group was selected for its focus oncash overlay and long-standing relationships with California pension funds.

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Denver Schools Study Portable Alpha

The $2.9 billion Denver Public SchoolsRetirement System will study portable alphain the coming months and may make anallocation in March. The board considersportable alpha a good diversifier and returngenerator, said CIO Gary Ratliff. Theallocation would likely focus on large-capU.S. equity. “It’s getting hard to find

domestic long-only managers that can add value,” he said. “Thisway we can increase alpha and still have that U.S. large-capbeta.” Ratliff declined to speculate on how much might becommitted to portable alpha or if mandates would go to new orincumbent managers.

Reviewing Hedge FundsMissouri Fund Preps Int’l Real Estate Move

The $1.8 billion Missouri Department ofTransportation & Patrol EmployeesRetirement System is planning to invest ininternational real estate and reviewing a hostof hedge fund strategies for diversification.

The fund has 15% of its assets in domesticprivate real estate, although its target is only13%. CIO Larry Krummen is working with

Summit Strategies Group to diversify the portfolio and isresearching whether to use international real estate investmenttrusts or private real estate. He wants to come up with a gameplan by the end of the first quarter and seek active managers afterthat. International investments would be funded by rebalancingaway from domestic managers.

Last year, the board approved hedge funds either as astandalone allocation within the fixed-income portfolio, or aspart of a portable alpha platform. The fund currently invests20% of its assets in market-neutral hedge funds—7% of whichare part of its portable alpha program, with the remaining 13%sitting within its fixed-income allocation. “We have available cashto fund additional hires currently under review,” said Krummen.

The fund is considering Asian and European market-neutralstrategies for diversification. It is also evaluating higher alpha,more opportunistic hedge funds for inclusion elsewhere in itsportfolio, such as its 5% opportunistic debt allocation.Krummen said he is considering a couple of Asian distressed debt

managers. Albourne America advises the plan on hedge funds.The system started investing in private equity two years ago. It

has a 10% target but only 3% is actually invested. Krummen isseeking hedge funds that could function as private equitysurrogates while he waits for his private equity managers to makecapital calls. These are mostly long/short equity funds with along bias that aim to deliver equity-like returns with lowervolatility. Activist hedge funds could fit here, too. Krummen isconcerned about equity markets in general and wants to reduceequity risk without sacrificing returns.

Norfolk’s New Board To Consider AltsThe $900 million Norfolk (Va.) Employees RetirementSystem may consider initial investments in alternative assetclasses such as private equity and hedge funds this year. In 2007the fund’s board had 100% turnover and as of December hadthe necessary eight members in place to make investmentdecisions, said CIO Kamal Khanna. The previous board, whichhad the same chairman for 18 years, had consistently decidedagainst alternatives. “What do we think of private equity? Whatdo we think of hedge funds? They will be asking all thesequestions,” Khanna said. Any decision would be many monthsaway and he would prefer not to receive manager solicitationsuntil that time.

The new board will also do a complete review of its traditional60% equities, 40% fixed-income asset allocation. “They willdecide from scratch what they will do,” said Khanna. Among thechallenges the new board will face will be finding a replacementfor Khanna as cio when he retires in June 2009. SummitStrategies Group advises the fund.

Windy City Utility Opens Doors ToAlts, Int’l EquityThe $1.7 billion Metropolitan Water Reclamation District ofGreater Chicago pension plan is receiving advice on internationalequity and alternatives, such as real estate and hedge funds. It maycreate allocations to these asset classes this year.

The plan was released from legislative restrictionsprohibiting these asset classes last summer, said Susan Boutin,executive director. Restrictions were lifted for all state funds inIllinois almost a decade ago, but MWRD’s conservative boardrequested to maintain them. The plan asked for permission tomake international investments last year, but the statelegislature decided to remove all limitations. “They said, ‘You’re

Larry Krummen

Searches

Gary Ratliff

MML012808 1/24/08 5:48 PM

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being silly. Other state funds have been doing these investmentsfor years and they’re doing fine,’” Boutin recalled.

MWRD approved a 5% international equity allocation inDecember, an amount which could increase later in the year. Theinitial allocation was awarded to State Street Global Advisors.“Right now we’re just filling in holes in our asset allocation withexisting managers,” Boutin said, adding that new managersearches would be unlikely until at least mid-year. It is too earlyto speculate on how much MWRD may allocate to alternativesor what form the portfolio might take.

May Seek ManagersKansas Boosts Real Assets, Int’l EquityThe $14 billion Kansas Public Employees Retirement Systemhas increased its allocation to real return investments to 14%from 10% to help meet its liabilities. This allocation includesTreasury-inflation protected securities, infrastructure, timber andabsolute return strategies that deliver LIBOR-plus return streams.CIO Vince Smith said manager hires are likely; over the comingmonths, he and his staff will discuss proposals for implementingthis increase with the board. The move follows an asset study byPension Consulting Alliance that focused more closely onliabilities than past studies. The Sunflower State will cut its fixed-income allocation to 14% from 19% as it prefers the risk/returnprofile of real assets to bonds.

International equity will be raised to 25% from 22% anddomestic equity cut to 30% from 35%. Smith said there aremore opportunities in international stock markets. He isn’t surewhether the fund will hire new managers. It uses Acadian AssetManagement, Morgan Stanley Investment Management,Barclays Global Investors and AllianceBernstein for EAFE andthen Wellington Management Co. and Capital Guardian TrustCo. for global equity. Smith hasn’t decided where the reductionsin U.S. equity exposure will come from, but said the fund has agood line-up of managers. It uses BGI and QuantitativeManagement Associates, in addition to portable alpha strategieswith Payden & Rygel Investment Management and NomuraAsset Management, and an in-house passive Russell 1000portfolio. Payden & Rygel derives alpha from bonds whileNomura manages Japanese equity; both mandates employ a U.S.equity index overlay.

The plan will increase real estate to 10% from 8% and privateequity to 6% from 5% using a combination of incumbentmanagers and new opportunities. The fund, which also has 1%

in cash, is about 70% funded. Allan Emkin at PCA advises thefund and takes calls from managers on its behalf.

Music City Eyes 130/30,Infrastructure RFPs The $2.2 billion Metropolitan Government of Nashville &Davidson County (Tenn.) Pension Plan will likely issue an RFPfor a 130/30 manager after a Jan. 29 meeting. An initialallocation will be around $100 million, said CIO FadiBouSamra. The plan considers 130/30 a better means ofcapturing alpha than long-only large-cap equity. It may alsoconsider issuing an infrastructure RFP at the meeting, but thespecifics have not been determined.

BouSamra was appointed cio last May and has been a strongproponent of introducing long/short strategies andinfrastructure, as well as increasing overall exposure toalternatives (MML, 08/27).

North Dakota Taps JPMorgan, Prudential

The North Dakota State Investment Boardhas committed $60 million to JPMorganAsset Management’s Infrastructure InvestmentsFund and $75 million to PrudentialInvestment Management’s Pru Alpha strategy.

The infrastructure fund fits into the$1.4 billion state insurance trust’s exposureto inflation-protected assets. This 20%

allocation used to be held predominantly in Treasury inflation-protected securities, but the board has been graduallydiversifying it. At the end of 2006, North Dakota invested$100 million of pension fund money into the same JPMorganfund. JPMorgan has a top-quality team and a wealth ofresources, said CIO Steve Cochrane, adding that he likes the$2 billion infrastructure fund’s open-ended structure.

North Dakota has used Pru Alpha in a cash management poolsince Aug. 1 and the strategy returned just over 5% in six monthswith fairly low volatility. This month’s investment is within aportable alpha program—part of North Dakota’s $4.1 billionpension trust’s large-cap domestic equity portfolio. Pru Alpha,which has virtually no correlation to equity or fixed income, reapedstrong rewards from shorting subprime. Cochrane has knownPrudential’s fixed-income team for years and said Pru Alphaprovides access to their best ideas on the long and short sides.

Searches (cont’d)

Steve Cochrane

MML012808 1/24/08 5:48 PM

For more information on attending or sponsoring the 7th Annual Public Pension Fund Awards for ExcellencePlease contact: Tracey Redmond, Awards Director, at tel: 212-224-3239, or email: [email protected],

or visit the awards website at www.moneymanagementletter.com/mml/2008awards/

oney Management Letter’s 7th Annual Public Pension Fund Awards for Excellence is held in conjunction with Information Management Network’s 13th Annual Public Funds Summit,

and recognizes industry leaders that have stood out for excellence over the past year. Last year’s dinner hosted over 200 leaders from every facet of the public funds industry, including more than 90 plan sponsors and consultants. This year’s dinner is expected to enjoy an even greater turnout. Join us as we honor the nominees and announce and award this year’s winners!

M

Award Categories and NomineesPlan Sponsor Awards

LARGE PUBLIC PLAN OF THE YEARArkansas Teachers Retirement

SystemCalifornia State Teachers

Retirement SystemNew Jersey Division of InvestmentSouth Carolina Retirement System

MIDSIZED PUBLIC PLAN

OF THE YEAR

Cincinnati Retirement SystemMissouri Local Government

Employees Retirement SystemMissouri Department of

Transportation & Patrol Employees Retirement System

San Bernardino County Employees Retirement Association

SMALL PUBLIC PLAN OF THE YEAR

Austin Police Retirement FundHaverhill Retirement System

Louisiana State Police Retirement System

Ohio State Highway Patrol Retirement System

Manager Awards ALTERNATIVES MANAGER

OF THE YEAR

The Blackstone GroupMorgan Stanley Investment

ManagementPaulson & Co

BOND MANAGER OF THE YEAR

Ashmore Investment ManagementPIMCO

Loomis, Sayles & Co.

EQUITY MANAGER OF THE YEAR

Baring Asset ManagementDimensional Fund Advisors

GMO

EMERGING MANAGER

OF THE YEAR

Credo Capital ManagementPhocas Financial

Piedmont Investment Advisors

Individual Awards PUBLIC PLAN CONSULTANT

OF THE YEAR

Doug Kryscio, Principal and Senior Consultant, MercerAllan Martin, Partner, New

England Pension ConsultantsMichael O’Leary, Executive V.P.,

Callan Associates

MARKETER OF THE YEAR

James Clarke, V.P. for U.S. Institutional Business, PIMCOKristin Hovencamp, Director of

Institutional Sales, GAMPaul Meskiewicz, Managing

Director, Institutional Investment Products, Hartford Financial

Group

Large Public Plan Award Sponsor

Premium Chocolate Sponsors

Table Sponsors

Mid-Sized Public Plan Award Sponsor

Lifetime Achievement Award Recipient:Chuck Valdes, Chairman of the Investment Committee,

California Public Employees Retirement System

Speak up!To convey your support for a nominee, please contact:

Emma Blackwell, at 212-224-3279 or [email protected]

IIEvents-PublicPension 1/16/08 4:23 PM Page 1



Hammond Favors Large-Cap QualityHammond Associates is recommending thatclients increase their allocations to large-capquality growth stocks globally at the expense ofsmall-cap. The latter reached full valuation earlylast year and the discrepancy between small-and large-cap valuations grew as 2007progressed, said Rich Marra, director ofcorporate retirement plans in St. Louis,

describing large-cap growth as a bargain. Large-caps are betterpositioned to capitalize on international growth than moredomestic-oriented small-cap stocks.

Hammond’s clients have tilted their portfolios toward growththrough a combination of rebalancing and adding new managers.Hammond has recommended both active managers and indexfunds to reduce manager and tracking error risk. “Passivestrategies allow us to reduce cost in efficient markets while wefocus on the skill set in active strategies,” Marra explained.

Despite the growth rally from mid-May onwards, the cycle isstill in its beginning stages, said Janet Bunch, executive v.p. andinvestment counselor at Montag & Caldwell InvestmentCounsel in Atlanta. After a seven-year value run-up, growthstocks are so cheap that the growth cycle could be prolonged. Ina slowing economy, large-cap companies with consistent earningsgrowth are better placed to maintain their profitability. GeorgeNorthrop, v.p.-marketing at Montag & Caldwell, has seenreallocations from existing clients and positive flows into thefirm’s mutual funds, but there hasn’t been a lot of RFP activity.Andrew Eras, director of institutional marketing at Stralem &Co. in New York, has seen a lot of interest from prospects so farthis year, which he attributes to Stralem’s consistent returns.

Renewable Energy Manager TapsInto Rising DemandSustainable Energy Investors is raising assets for its New EnergyFund LP. The $15 million hedge fund recently securedcommitments totaling $20 million from two funds of funds,which should be finalized this month. Partner Abigael Lauferhopes to raise $500 million to $1 billion in the next three to fiveyears. She said interest from U.S. investors is increasing asdemand for renewable energy rises.

An offshore fund was also launched in September and Lauferis seeing enormous interest from Europe in solar energy andother sectors. Laufer and Founder Marx Cox will be traveling toconferences and road shows in Europe and the U.S. to pitch their

fund. They want to hire staff to fill back office positions so theycan focus more on marketing.

Demand for renewable energy will remain strong as long as oilprices stay high, Laufer said. Sources of renewable energy willthen become lucrative in terms of price competition. Negativeissues related to fossil fuel will persist, such as climate change.

The fund invests in publicly-traded companies globally, butLaufer and Cox think there are considerable investmentopportunities in the private sector. They will consider launchinga private equity fund this year. “There is a lot of entrepreneurialinnovation in this sector and not every company is ready to be apublic company,” Laufer said.

The investible universe is growing exponentially. When theNew Energy Fund was launched in 2004, Sustainable only hadabout 25 public companies to choose from, compared to around650 now. The fund focuses on supply and demand within therenewable energy sector and holds 30-50 stocks, selectingcompanies with annual growth expectations of 30-50%. Fees are1.5% and 20%. The fund was up 20% for 2007 and has a 28%annualized rate of return over three years.

PeopleApollo Snags Rainmaker For CapitalMarkets Push

Apollo Management has hired RobertBurdick, chief marketing officer at PequotCapital Management in New York, tospearhead an aggressive growth plan for itscapital markets division. Serving as co-head ofmarketing, Burdick will work alongsideStephanie Drescher, a partner who focuses onApollo’s private equity business. They plan to

build an institutional-quality marketing and client service groupand have yet to decide how many people to hire.

Apollo manages $10 billion in five capital markets vehicles,including some hedge funds, and intends to launch additionalstrategies. Its current offerings—Apollo Strategic Value Fund, APInvestment Europe, Apollo Investment Corporation, Apollo AsiaOpportunity Fund and Apollo European Principal Finance Fund—focus on debt and equity in the public and private markets.“The close collaboration among the firm’s investment teams istruly impressive,” said Burdick, adding that Apollo has afantastic reputation. The firm has $40 billion in total assetsunder management.

Burdick and his team raised more than $3 billion in

Marketing Strategies

Rich Marra

Robert Burdick

MML012808 1/24/08 5:48 PM

January 28, 2008 www.moneymanagementletter.com Money Management Letter

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institutional assets for Pequot, which he joined in January 2005.He hired 12 client-facing marketers and client serviceprofessionals, eight of who remain with the firm. Frances Selby,head of client service, will replace him.

Pequot has experienced mixed fortunes over the past coupleof years, during which it has faced a Securities and ExchangeCommission investigation into insider trading charges againstCEO John Mack and Morgan Stanley. No wrongdoing wasfound. Last year, the $7.4 billion firm closed three funds with$500 million in total assets—two had performed poorly andthe third failed to attract sufficient investor interest.Meanwhile, Art Samberg’s flagship Pequot Core Global Fundreturned 35.1% last year and the small-cap Pequot Scout Fundwas up 18.4%.

Throughout his career, Burdick and marketing teams he hasled have raised $30 billion. He has worked for MacKay Shields,Loomis, Sayles & Co. and Travelers Asset ManagementPension Services.

Philadelphia Hires Investment OfficerRhonda McNavish has joined the $5.2 billion PhiladelphiaPublic Employees Retirement System as an investment officerfor public equities and fixed income. She replaces Brian Glanz,who left the fund last year to join hedge fund of funds NewMarket Capital. McNavish was previously a senior researchanalyst at ADVISORport, a provider of managed accounttechnology and operational services to money managers andother financial firms. McNavish has also worked as a creditanalyst at Deutsche Asset Management, saidCIO Chris McDonough.

Separately, the fund will issue an RFP forglobal bond managers this month or earlyFebruary to boost returns in fixed incomeand better reflect market opportunities. Thefund invests 24% in bonds with AberdeenAsset Management and Pyramis GlobalAdvisors for core-plus, Western Asset Management for core-plus and global inflation-linked bonds, Lord Abbett forconvertible bonds and Rhumbline Advisers for a passiveLehman Brothers Aggregate mandate. Philadelphia mightswitch some incumbent managers to global mandates, but willalso consider new firms (MML, 10/18).

Additionally, the board will select a general consultant on Jan.31. The finalists are R.V. Kuhns & Associates, Yanni Partnersand incumbent Fiduciary Investment Solutions. Emergingmarket equity finalists will also be chosen at this meeting,McDonough said.

Consultants Leave CallanBrian Zeiler and Aaron Roberts, consultantsat Callan Associates, have left the firm forunrelated reasons. Zeiler, a v.p. and fundsponsor consultant in Atlanta, is joiningFranklin Templeton Institutional’s FortLauderdale, Fla., sales team. He will focus onEast Coast foundations & endowments. Heleft on Jan. 9, having spent seven years with

Callan, both as a general consultant and an international equitymanager research specialist. His clients have been notified andare being transitioned to other consultants, said NancyMalinowski, spokeswoman.

Roberts is moving to Artisan Partners in New York wherehe will be reunited with former colleague Eric Colson. Theyboth belonged to Callan’s Institutional Consulting Group,which works with money managers. Roberts left Callan’sFlorham Park, N.J., office on Dec. 31 and Colson departedback in 2005.

Domestic Bond Team Leaves SSgAMike Wands, head of fixed income for North America at StateStreet Global Advisors, has left the firm along with threeportfolio managers. Marie McGehee, spokeswoman, declined tocomment on why they left. Wands could not be reached.

As part of a management shake-up late last year, Mark Marinellawas named global cio for fixed income. Paul Greff, director ofglobal fixed income, and Michael O’Hara, head of active globalfixed income, left SSgA. Marinella is planning to enhance his teamin research, portfolio strategy and risk management, McGehee said.This might involve hiring professionals as the need arises, sheadded. Marinella did not return a call.

Chris McDonough

Brian Zeiler

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Paid subscribers now have access to a PDF of the upcomingMonday’s newsletter on MML’s Web site Friday afternoonbefore 5 p.m. EDT. That’s a 64 hourjump on mail delivery, even whenthe post office is on time! Readthe news online at your desk orprint out a copy to read atyour leisure over theweekend. Either way, you’ll begetting our breaking news evensooner and starting your week offfully informed!

MML012808 1/24/08 5:56 PM



Brian CollettCIO, Missouri Local Government EmployeesRetirement System

Brian Collett takes a defensive approach to portfoliomanagement. “My job is to build a house that can withstand anytype of weather. I don’t forecast the weather,” he said. He focuseson diversifying the portfolio so it can hold its own through allmarket environments in the long-term.

When Collett joined the $4 billion fund in 2005, theportfolio was beating its target 7.5% rate of return. He wanted tomake sure that performance remained consistent by reducingrisk, and he sought to diversify the plan as much as possible.Collett has convinced the board to invest in a range of alternativestrategies including absolute return, portable alpha, 130/30,commodities, real estate, private equity and infrastructure. At thebeginning of 2007, the system set a 10% combined targetallocation to private equity and real estate and has been makingcommitments ever since—seeking managers that have the leastcorrelation to public markets.

On AlternativesThe fund has already made commitments to private equity fundswith TCW and Brentwood Associates and has invested in aninfrastructure fund with Global Infrastructure Partners as partof its real estate allocation. Going forward, Collett is seekingfunds that will be better diversifiers, focusing on opportunisticreal estate, more infrastructure, mid-market to small buyoutfunds and mezzanine debt. Large buyouts and venture capitalmanagers tend to rely on initial public offerings as an exitstrategy, making them more correlated to Missouri LAGERS’traditional investments. “Opportunistic real estate tends to beless general economy oriented and more local economyoriented,” he added. It also provides more of a short-term focus,while infrastructure is longer-term.

As Collett operates with a minimal investment staff andwithout a consultant, he has been forming strategic allianceswith placement agents. He came across TCW’s fund throughan alliance with Credit Suisse. “It’s about finding goodtrustworthy individuals, forming a strategic line-up and tellingthem what I’m looking for,” he said. Collett has about 12relationships with placement agents to filter through privateequity managers. The types of general partners he seeks are

normally too small to have their own marketing staff, sopartnering with placement agents or getting suggestions fromother limited partners makes sense. His incumbent managersoften introduce Collett to their other pension fund clients, whoput him in touch with successful managers.

Collett doesn’t like to use the term “hedge funds” and prefers“absolute return,” as he seeks strategies that offer little to no beta.“Some hedge funds have as much as 30-40% beta exposure andthat’s what I’m trying to diversify away from,” he said. Collett hasconverted some of his incumbent bond managers to absolutereturn strategies and will seek to invest in absolute return equity inthe coming years. The change will likely be implemented throughincumbent equity managers that offer hedge fund-like strategies.

On Partnering With ManagersCollett makes his managers work for their fees, using them likean investment staff. He often leans on Bridgewater Associates,Brandywine Global Investment Management, Barclays GlobalInvestors, PIMCO and Aronson+Johnson+Ortiz for investmentanalysis and advice. PIMCO manages absolute return fixed-income and commodities, and Collett often goes to the managerfor fixed-income expertise. He views AJO as a sophisticatedtrading manager. “I go to them with every trade relatedquestion,” he said. Depending on the managers’ skill set, Collettwill give them analysis work. For example, if he is doingcapitalization analysis on the whole portfolio or on a specificmanager, he will give another incumbent all the holdings andreturns, while removing manager names, and have them evaluatethe portfolio. “It’s the same type of work that I would give ananalyst that was working here,” he said.

Collett often has so much conviction in his incumbentmanagers that he will be the first investor in their new offerings.Large-cap value firm Systematic Financial Management recentlylaunched an international equity strategy that the fund investedin. LAGERS was also the first external client in Brandywine’s130/30 strategy. PIMCO, meanwhile, secured a commitmentfrom the plan in its Distressed Mortgage Fund. Other distressedfunds have approached Collett, but he and his board had moreconfidence in PIMCO. “They are a very good bond managerand an excellent analyzer of credit,” Collett said.

Personal NotesPrior to joining Missouri LAGERS, Collett was a senior researchmanager at the South Carolina Retirement System. He beganhis investment career at Russell Investment Group as a seniortechnology analyst. Collett is a CFA charter holder and obtainedhis MBA from Butler University in Indiana. He lives in JeffersonCity, Mo., with his wife of 15 years, Michelle, and two children,Andrew and Zoe. He is an avid runner and hopes to find time toparticipate in a marathon in 2008.

P L A N S P O N S O RP R O F I L E

MML012808 1/24/08 5:48 PM


Will the asset management divisions of large investmentbanks suffer as a result of their parent companies’recent subprime troubles?

David Thomas, ceo, Equitas CapitalAdvisors: There is almost no way it can nothave an impact on the asset managementdivisions. A corporation works like anorganism: if it’s bleeding in one area thewhole body will send what is needed to thatarea. The corporation will do what it thinks itneeds to, to survive. Corporate managers and

ceos will move things around. During the bear market from2000 to 2002 a number of asset management divisions werestruggling and you saw the parent companies raid other divisionsto support them. It could just as easily happen in reverse. Theworst thing they can do is to raid an asset management divisionthat is doing fine on its own to shore up losses. The division willhemorrhage talent if they do, because if portfolio managers havebeen hitting their marks they’ve earned their bonuses. Those guysknow what they’re worth.

The best way for management to minimize the impact withclients is to make it clear that the investment management armis a separate entity. Connection with banks that were hit bysubprime could have an effect on a search. Just the possibilityof that kind of distraction could cause a manager to lose apossible mandate. When you get down to the finals you’reprobably comparing the best money managers out there. In theend you’re splitting hairs, looking for any reason to bring itdown to the one you’re going to entrust with those assets. Itdoesn’t take much.

Peter Roney, Director of Manager Research, CambridgeAssociates: It depends on what is going on in theorganization. Some have handled it better than others—focused very clearly on maintaining trust and integrity withclients and some have even compensated clients—and thathas a very pronounced effect. With subprime it is veryapparent that most of the problems are in active fixed-incomeso the effect on other investment teams should be negligible.If clients smell contagion it could become a problem. A lossof confidence in how the overall organization is run can causestaff to leave to protect their reputation. If the hit has enoughimpact it can cause the reduction of bonuses and incentivesacross all teams.

The business of investing is about diversification andmanaging risk. The failure of risk management could lead to ageneral withdrawal of assets. One of the things we look for inan organization is the humility to realize that there is no suchthing as certainty. No one could have been expected toanticipate the current problems in subprime. Certainly theratings agencies didn’t. There is a book called The Black Swan:The Impact of the Highly Improbable by Nassim Nicholas Talebabout these big improbable events which no one predicts. It’s abit of a hard read, but it does a good job of illustrating thatthese events happen far more often than we think they do, orcould. Risk management is based on statistics and events likesubprime are often so improbable that no model can pickthem up. I think that all the examples we have seen of seriouslosses is with organizations which lost sight of that. They weremaking unusual bets; high concentration and a lot of leverage.Unfortunately, the market has a nasty habit of disabusing us ofour certainties.

A S K T H E A D V I S O RInvestment Subsidiaries Should Distance Selves From ParentsEvery issue, MML poses reader questions to consultants. Is there something you’re dying to ask? Let us know by contacting EmmaBlackwell, managing editor, at 212 224 3279 or [email protected].

David Thomas

The world's number one sales and marketing tool for investment managers

iisearches posted $220 billion inalternative search leads in 2006...

...grow your business withthe latest daily search leads.

For further information on iisearches’ daily search leads and searchable database of search-and-hire activity since 1995, visit www.iisearches.com or contact Keith Arends

in New York at 212-224-3533 or at [email protected], or Ben Grandy (Europe and rest of the world) Tel: +44 (0)20-7779-8965 or at [email protected]

MML012808 1/24/08 5:48 PM



Funds• The $115 billion Teacher Retirement System of Texas istalking to six finalists about becoming “strategic partners,”including BlackRock. Successful managers will each receive$1 billion or more to invest across the globe. They will beexpected to share knowledge and tactics, and give the fund accessto investment deals.

• The Ohio School Employees Retirement System is seeking aglobal real estate investment trust manager to oversee up to$250 million. Additionally, the plan hired six hedge fundmanagers: Och-Ziff Management, Marathon AssetManagement, Diamondback Capital Management, EndeavorCapital, Farallon Capital and Taconic Capital Advisors.

• Most U.S. institutional investors posted modest returns lastyear, according to Northern Trust. Corporate and public fundsreturned 8.4% and 8.5%, respectively, while foundations andendowments gained 9.4%.

• The Louisiana State Police Retirement System selectedHancock Timber Resource Group and The Campbell Group tomanage $5 million each in timber.

• The Montana Board of Investments will issue an RFP at theend of January for at least one non-core fixed-income manager.Currently, all its as all fixed-income assets are managed in-house,in core strategies.

People• Hudson Bay Capital hired Amaranth Advisors’ ChiefOperating Officer Charles Winkler to fill a similar position.

• New England Pension Consultants hired Edward O’DonnellIII and Jeffrey Mitchell as consultants. O’Donnell was anassistant v.p. and portfolio specialist at Wellington ManagementCo. Mitchell was a senior investment consultant at PillarFinancial Advisors.

• Daniel Cardell has joined Wayne Hummer AssetManagement as president and cio. He was teaching finance atthe University of Illinois at Chicago and previously served asdirector of equities at Weiss, Peck & Greer and Bank of Americain Chicago. Todd Doersch, founder of hedge fund CognitiveInvestment Management, has also joined Wayne Hummer ashead of product management.

• State Street Corp. has promoted David Gutschenritter totreasurer from executive v.p.

• Verizon Investment Management is seeking a director tohandle its absolute return investments within its definedbenefit plans.

• Hillcrest Asset Management has hired Douglas Stark asmanaging director for portfolio management and research.Stark was a senior v.p. and director of research at MartingaleAsset Management.

Firms• Denver-based Red Rocks Capital and ALPS Fund Serviceshave launched an actively-managed mutual fund that invests inthe stock of publicly-traded private equity firms.

• Paradigm Asset Management has launched a high-capacitysmall-cap core strategy designed to offer greater active exposureto a variety of small-cap stocks.

• Dubai Holding has acquired 38.14 million class A shares ofhedge fund firm Och-Ziff Capital Management Group, a51.4% stake.

• Consulting firm Laven Partners plans to launch a “bestideas” fund that will invest with boutique hedge fundmanagers. Likely dubbed Laven Funds Multi-StrategyFund, the portfolio will launch March 1 and will invest inabout 10 funds.

• Martin Asset Management plans to launch its IliosAlternative Energy Fund. The long-biased fund will invest incompanies tied to wind, solar, hydro, geothermal andbiomass energy.

• Bear Stearns is in talks to acquire a 10% stake in China AssetManagement. China AM, a subsidiary of Citic Securities, hasalso held talks with T. Rowe Price Group.

• Credit Suisse and General Electric are teaming up to launch a$1 billion Middle Eastern infrastructure fund with Abu Dhabi-based investment firm Mubadala.

• BlackRock’s fourth-quarter earnings surged 90%, thankslargely to acquisitions and performance fees. Acquisitionsincluding Merrill Lynch’s investment unit and Quellos Group’shedge fund unit helped the firm double its assets to $1.4 trillion.Performance fee income more than tripled to $153 million from$40 million.

• UBS launched the UBS Greenhouse Index, which allows marketplayers to gauge their exposure to greenhouse gas emissions.

News RecapThe News Recap is a summary of publicly reported news briefs. The information has been obtained from sources believed to be reliable, butMML does not guarantee its completeness or accuracy.

MML012808 1/24/08 5:48 PM



Search & Hire DirectoryThe following directory includes search and hire activity from iisearches for the two weeks ending Wednesday, Jan. 23. The accuracy of theinformation, which is derived from many sources, is deemed reliable but cannot be guaranteed. All amounts are in US$ millions unlessotherwise stated. To report manager hires and new searches, please call Emma Blackwell at (212) 224-3279.

Potential SearchesTotal Account

Fund & City Amount Plan Type Assignment Size Consultant Comments/Firm Hired

Armstrong World Industries, USD2,500 Corporate D.B. Unknown / Active USD2,300 Russell Investment Plans to adopt liability-driven investments this year.Lancaster, PA Fixed-Income Group, New York, NY

Aurora City General Employees USD306 Public D.B. International / N/A Callan Associates, Will place State Street Global Advisors on watch for personnel Retirement System, Aurora, CO Active Equity San Francisco, CA changes.

Cranston Print Works Co., USD89.60 Corporate D.B. Global / Asset Study USD89.60 State Street Global Will conduct a triennial asset allocation study by June.Cranston, RI Advisors, Boston, MA

Cranston Print Works Co., USD89.60 Corporate D.B. US / Active Fixed-Income N/A State Street Global Analyzing liability-driven investment strategies with plans to Cranston, RI Advisors, Boston, MA eventually add the asset class to its portfolio.

Hercules Incorporated, USD2,035 Corporate D.B. US / Active Fixed-Income N/A Russell Investment Group, Increasing its fixed-income exposure to 80%.Wilmington, DE New York, NY

Ingram Industries, Nashville, TN USD187 Corporate D.B. Global / Asset Study USD200 Unknown Will do an asset allocation study next month.

Maryland State Retirement & USD39,800 Public D.B. US / Alternative (All) / N/A Ennis Knupp + Associates, May seek commodities managers after increasing the allocation to Pension System, Baltimore, MD Commodities Chicago, IL 5% from 2%, following an asset study.

Maryland State Retirement & USD39,800 Public D.B. Global / Active Equity N/A Ennis Knupp + Associates, Increased its allocation to 15% from 10% and may seek managers Pension System, Baltimore, MD Chicago, IL later this year.

Metropolitan Water Reclamation USD1,100 Public D.B. International / N/A Standard Valuations, Studying international equity and may make allocations to the asset District Retirement Fund, Chicago, IL Active Equity St. Paul, MN class this year.

Metropolitan Water Reclamation USD1,100 Public D.B. US / Alternative N/A Standard Valuations, Researching hedge funds. May make allocations this year.District Retirement Fund, Chicago, IL Hedge Funds St. Paul, MN

Metropolitan Water Reclamation USD1,100 Public D.B. US / Real Estate N/A Unknown Trustees are learning about real estate and may make allocations District Retirement Fund, Chicago, IL this year.

Missouri Department of USD1,800 Public D.B. International / Real Estate N/A Summit Strategies Group, Planning a maiden foray into international real estate.Transportation & Patrol Employees St. Louis, MORetirement System, Jefferson City, MO

Missouri Public School Retirement USD25,700 Public D.B. US / Passive Equity N/A Unknown Planning changes to its domestic large-cap equity program, System, Jefferson City, MO including shifting some money to passive from active management,

terminating several managers and seeking alpha sources.

Montana Board of Investments, USD8,000 Public D.B. US / Active Fixed-Income / N/A R.V. Kuhns & Associates, Will discuss issuing an RFP for non-core fixed-income managers at Helena, MT High-Yield Portland, OR its February board meeting.

New Mexico State Investment USD16,500 Endowment US / Real Estate N/A Unknown Looking to increase its real estate exposure to 3% from 2.5%.Council, Santa Fe, NM

New Mexico State Investment USD16,500 Endowment US / Alternative N/A Unknown May seek additional hedge fund managers as part of its strategy to Council, Santa Fe, NM Hedge Funds agressively round out its alternatives allocation. There is no time

frame for a decision.

Norfolk Employees’ Retirement USD900 Public D.B. US / Alternative N/A Summit Strategies Group, Considering initial private equity investments this year. Not talking System, Norfolk, VA Private Equity St. Louis, MO calls from managers.

Norfolk Employees’ Retirement USD900 Public D.B. US / Alternative N/A Summit Strategies Group, May consider initial hedge fund investments this year. Would prefer System, Norfolk, VA Hedge Funds St. Louis, MO not to receive manager solicitations at this time.

Oklahoma Police Pension & USD1,800 Public D.B. US / Active Equity / N/A Asset Consulting Group, Will review performance of its enhanced large-cap mandate run by Retirement System, Oklahoma City, OK Large-Cap St. Louis, MO State Street Global Advisors at its next meeting. It may recommend

termination and possible issuance of an RFP to replace the firm.

New SearchesArkansas Teachers Retirement USD12,000 Public D.B. US / Alternative N/A Ennis Knupp + Associates, Carved out a 5-6% allocation to inflation-protected strategies System, Little Rock, AR Chicago, IL including timber, commodities, infrastructure and TIPS.

Arkansas Teachers Retirement USD12,000 Public D.B. US / Active Equity USD300 Ennis Knupp + Associates, Will conduct an invitation-only search and issue RFPs to a group of System, Little Rock, AR Chicago, IL activist managers.

Fort Worth (Texas) Employees USD1,800 Public D.B. US / Consultant N/A None Issued an RFP for a hedge fund consultant. Proposals are due by Feb. 1.Retirement Fund, Fort Worth, TX

MML012808 1/24/08 5:48 PM

HF Asset Flows 11/20/07 3:08 PM Page 1



International Paper Co., USD8,500 Corporate D.B. US / Alternative (All) / N/A Rocaton Investment Seeking managers of derivatives-based strategies. Plans to make Stamford, CT Commodities Advisors, Norwalk, CT selections during the first quarter. Interested firms should contact

Rocaton Investment Adivsors.

International Paper Co., USD8,500 Corporate D.B. US / Alternative (All) N/A Rocaton Investment Seeking commodities managers. Plans to make selections during the Stamford, CT Advisors, Norwalk, CT first quarter. Interested firms should contact Rocaton Investment

Adivsors.

International Paper Co., USD8,500 Corporate D.B. Global / Passive N/A Rocaton Investment Seeking managers to implement new allocations to Treasury Stamford, CT Fixed-Income / Advisors, Norwalk, CT inflation-protected securities. Plans to make selections during the

Inflation-Linked Bonds first quarter of this year. Interested firms should contact Rocaton Investment Adivsors.

Massachusetts Pension Reserves USD54,200 Public D.B. EAFE / Passive Equity USD1,500 Unknown Looking for passive EAFE equity managers.Investment Management Board, Boston, MA

New Jersey Division of USD81,800 Public D.B. US / Active Equity / USD2,000 Strategic Investment Will issue an RFQ for managers to handle USD2 billion in small-cap Investment, Trenton, NJ Small-Cap Solutions, San Francisco, CA later this month.

New Jersey Division of USD81,800 Public D.B. International / USD3,000 Strategic Investment Will issue an RFQ in March for managers to handle USD3 billion in Investment, Trenton, NJ Active Equity Solutions, San Francisco, CA March.

New Jersey Division of USD81,800 Public D.B. US / Alternative USD2,000 Cliffwater, LLC, Will invest USD1.7 billion in hedge funds and USD250 million in Investment, Trenton, NJ Hedge Funds Santa Monica, CA fund-of-funds by June 2008. It will focus on emerging manager and

activist fund-of-funds.

North Attleboro (MA) Retirement USD60 Public D.B. International / N/A Dahab Associates, Will issue an RFP for an international equity manager by month’s end.System, North Attleboro, MA Active Equity Franklin, MA

Ohio Police & Fire Pension USD12,900 Public D.B. US / Alternative Hedge USD400 Wilshire Associates, Requesting proposals from qualified firms interested in providing Fund, Columbus, OH Funds / Market-Neutral Pittsburgh, PA active market-neutral alpha overlay investment management

Hedge Fund services. Proposals are due Feb. 8.

Orange County Employees USD8,000 Public D.B. US / Real Estate / Core USD46 Callan Associates, Seeking two commingled fund managers for its core real estate Retirement System, Santa Ana, CA San Francisco, CA program.

School Employees Retirement USD11,690 Public D.B. Global / Real Estate / USD250 Unknown Searching for a global REIT manager to run up to USD250 million. System of Ohio, Columbus, OH REIT The RFP will be issued in the next few weeks.

Workers Compensation Board CAD2,800 Permanent Fund Global / Active Equity / N/A Brockhouse & Cooper, Actively seeking 130/30 equity managers.of Alberta, Edmonton, ALB 130/30 Montreal, QE

Updated SearchesAdams County Retirement USD206 Public D.B. US / Active Equity / N/A Watershed Terminated RS Investments from a domestic small-cap growth Plan, Brighton, CO Small-Cap Growth Investment Consultants, equity mandate.

Highlands Ranch, CO

Adams County Retirement USD206 Public D.B. US / Active N/A Watershed Terminated Janus Capital Corporation for domestic active fixed-Plan, Brighton, CO Fixed-Income Investment Consultants, income for unspecified reasons.

Highlands Ranch, CO

El Paso County Retirement USD275 Public D.B. US / Active Fixed- USD13 Watershed Terminated Western Asset Management Co. because it wasn’t System, Colorado Springs, CO Income / Absolute Return Investment Consultants, providing sufficient diversification. WAMCO’s assets were

Highlands Ranch, CO reallocated to incumbents.

Indiana Public Employees’ USD16,100 Public D.B. Global / Active Equity / USD413 Mercer , New York, NY Terminating Brandes Investment Partners.Retirement Fund, Indianapolis, IN Micro-Cap Growth

Kentucky Retirement Systems, USD17,000 Public D.B. US / Consultant N/A Strategic Investment Issued an RFI for a real estate investment consultant. Responses Frankfort, KY Solutions, San Francisco, CA were due by Jan. 23.

Massachusetts Pension USD54,200 Public D.B. US / Active Equity USD1,500 Unknown Terminated Boston Company Asset Management and State Street Reserves Investment Management Global Advisors due to personnel issues.Board, Boston, MA

New Mexico Public USD13,400 Public D.B. Asia / Alternative Private USD30 Unknown Investment committee is expected to recommend at its Jan. 31, Employees Retirement Equity / Buyout 2008 board meeting that the fund commit USD30 million to TPG Asia V.Association, Santa Fe, NM

Teacher Retirement System USD115,000 Public D.B. Global / Active USD6,000 Unknown Plans to hire four to six of the best global money managers to invest of Texas, Austin, TX Fixed-Income USD1 billion or more each in fixed-income across the globe.

Identified six finalists including BlackRock.

Completed SearchesAustin (Texas) Police USD515 Public D.B. Global / Multi Asset USD15 Consulting Services Group, Thornburg Investment ManagementRetirement Fund, Austin, TX Memphis, TN

City of Naples (Fla.), Naples, FL USD85 Public D.B. US / Active Equity / N/A Citigroup, NY Rothschild Asset ManagementLarge-Cap Value

New Searches (cont’d)Total Account


MML012808 1/24/08 5:48 PM



Completed Searches (cont’d)Total Account


Connecticut Retirement Plans & USD26,000 Public D.B. US / Real Estate / Core USD75 Unknown Cornerstone Real Estate AdvisersTrust Funds, Hartford, CT

El Paso County Retirement USD275 Public D.B. US / Active Equity / USD20 Watershed Eaton Vance ManagementSystem, Colorado Springs, CO Large-Cap Investment Consultants,

Highlands Ranch, CO

Iowa Municipal Fire & Police USD1,500 Public D.B. US / Active Equity / USD40 Summit Strategies Group, Quantitative Management AssociatesRetirement System, Des Moines, IA Large-Cap St. Louis, MO

Iowa Municipal Fire & Police USD1,500 Public D.B. US / Active Equity / USD60 Summit Strategies Group, State Street Global AdvisorsRetirement System, Des Moines, IA Large-Cap St. Louis, MO

Iowa Municipal Fire & Police USD1,500 Public D.B. US / Active Equity / USD60 Summit Strategies Group, INTECHRetirement System, Des Moines, IA Large-Cap St. Louis, MO

Iowa Municipal Fire & Police USD1,500 Public D.B. US / Active Equity / USD40 Summit Strategies Group, JPMorgan Investment ManagementRetirement System, Des Moines, IA Large-Cap St. Louis, MO

Iowa Municipal Fire & Police USD1,500 Public D.B. US / Active Fixed- USD55 Summit Strategies Group, Aberdeen Asset ManagementRetirement System, Des Moines, IA Income / Core St. Louis, MO

Lehigh County (PA) Employees’ USD360 Public D.B. International / USD22 Unknown Julius Baer Investment ManagementRetirement Fund, Allentown, PA Active Equity

Los Angeles City Employees USD10,400 Public D.B. US / Active Equity USD22.60 Pension Consulting Sparx Asset ManagementRetirement System (LACERS), Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Active Equity USD73.80 Pension Consulting Knight Vinke Asset ManagementRetirement System (LACERS), Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Active Equity USD125 Pension Consulting Relational InvestorsRetirement System (LACERS), Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Active Equity USD58.70 Pension Consulting Hermes Pensions ManagementRetirement System (LACERS), Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Active Equity / USD50 Pension Consulting BLUM Capital PartnersRetirement System (LACERS), Small- to Mid-Cap Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. West Europe / USD35 Pension Consulting Governance for Owners GroupRetirement System (LACERS), Active Equity Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. UK / Active Equity USD35 Pension Consulting Principle Profits Asset ManagementRetirement System (LACERS), Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Alternative Private USD25 Hamilton Lane Advisors, Vista Equity PartnersRetirement System (LACERS), Equity / Buyout Philadelphia, PALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Alternative USD10 Pension Consulting Spire Capital PartnersRetirement System (LACERS), Private Equity / LBO Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Alternative USD5 Pension Consulting Relativity FundRetirement System (LACERS), Private Equity / LBO Alliance, Encino, CALos Angeles, CA

Los Angeles City Employees USD10,400 Public D.B. US / Active Equity / USD50 Pension Consulting New Mountain CapitalRetirement System (LACERS), Large-Cap Alliance, Encino, CALos Angeles, CA

Louisiana State Police Retirement USD460 Public D.B. US / Alternative / USD5 PRIME Asset Consulting, Hancock Timber Resource GroupSystem, Baton Rouge, LA Timberland/Vineyards Weehawken, NJ

Louisiana State Police Retirement USD460 Public D.B. US / Alternative / USD5 PRIME Asset Consulting, The Campbell GroupSystem, Baton Rouge, LA Timberland/Vineyards Weehawken, NJ

Massachusetts Pension USD54,200 Public D.B. Global / Active Equity USD2,750 Cliffwater, LLC, Marathon Asset ManagementReserves Investment Santa Monica, CAManagement Board, Boston, MA

Nebraska Investment USD10,800 Public D.B. US / Alternative Hedge USD100 Ennis Knupp + Associates, PIMCOCouncil, Lincoln, NE Funds / Distressed Debt Chicago, IL

Nebraska Investment USD10,800 Public D.B. US / Alternative USD25 Ennis Knupp + Associates, Resolute FundCouncil, Lincoln, NE Private Equity Chicago, IL

MML012808 1/24/08 5:48 PM





New Jersey Division of USD81,800 Public D.B. US / Alternative USD100 Unknown WLR Recovery FundInvestment, Trenton, NJ Private Equity / Buyout

New Mexico Public USD13,400 Public D.B. US / Real Estate USD30 Unknown Riverstone/Carlyle Global Energy and Power Fund IVEmployees Retirement Association, Santa Fe, NM

New Mexico Public USD13,400 Public D.B. Europe / Alternative USD30 Unknown CVC Capital PartnersEmployees Retirement Private Equity / BuyoutAssociation, Santa Fe, NM

New Mexico State Investment USD16,500 Endowment US / Consultant N/A Unknown Sun Mountain CapitalCouncil, Santa Fe, NM

New York State Common USD155,000 Public D.B. International / USD75 Unknown Caspian Capital PartnersRetirement Fund, Albany, NY Alternative Hedge

Funds / Absolute Return

New York State Common USD155,000 Public D.B. International / USD200 Unknown Mariner PartnersRetirement Fund, Albany, NY Alternative Hedge

Funds / Absolute Return

New York State Common USD155,000 Public D.B. International / USD4 Unknown Harbinger Capital Partners Retirement Fund, Albany, NY Alternative Hedge Funds /

Hedge Fund-of-Funds

New York State Common USD155,000 Public D.B. International / USD21 Unknown Sector Maritime Investments FundRetirement Fund, Albany, NY Alternative Hedge Funds /

Hedge Fund-of-Funds

New York State Common USD155,000 Public D.B. US / Alternative USD15 Unknown GESD Capital PartnersRetirement Fund, Albany, NY Private Equity

New York State Common USD155,000 Public D.B. US / Alternative USD25 Unknown Paladin Capital GroupRetirement Fund, Albany, NY Private Equity

New York State Common USD155,000 Public D.B. US / Alternative USD75 Unknown BLUM Capital PartnersRetirement Fund, Albany, NY Private Equity

New York State Common USD155,000 Public D.B. US / Alternative USD15 Unknown Giza Venture CapitalRetirement Fund, Albany, NY Private Equity

New York State Common USD155,000 Public D.B. US / Real Estate USD44 Unknown Cayuga Lake FundRetirement Fund, Albany, NY

New York State Common USD155,000 Public D.B. US / Real Estate USD12.35 Unknown Liberty PartnersRetirement Fund, Albany, NY

New York State Common USD155,000 Public D.B. US / Real Estate USD150 Unknown Apollo Real Estate AdvisorsRetirement Fund, Albany, NY

New York State Common USD155,000 Public D.B. US / Real Estate USD25 Unknown Lake Success FundRetirement Fund, Albany, NY

North Attleboro (MA) Retirement USD60 Public D.B. US / Active Fixed- USD5 Dahab Associates, Brandes Investment PartnersSystem, North Attleboro, MA Income / Core Franklin, MA

Norwalk (Conn.) Employees USD400 Public D.B. Global / Alternative USD14.60 Evaluation Associates, ABS Investment ManagementPension System, Norwalk, CT Hedge Funds Norwalk, CT

Norwalk (Conn.) Employees USD400 Public D.B. US / Alternative USD10 Evaluation Associates, Macquarie Infrastructure Group Pension System, Norwalk, CT (All) / Infrastructure Norwalk, CT

Norwalk (Conn.) Employees USD400 Public D.B. US / Alternative USD10 Evaluation Associates, Alinda Capital PartnersPension System, Norwalk, CT (All) / Infrastructure Norwalk, CT

Orange County Employees USD8,000 Public D.B. US / Alternative USD70 Callan Associates, PIMCORetirement System, Santa Ana, CA (All) / Commodities Atlanta, GA

Orange County Employees USD8,000 Public D.B. US / Alternative USD70 Callan Associates, Schroder Investment Management North AmericaRetirement System, Santa Ana, CA (All) / Commodities San Francisco, CA

Orange County Employees USD8,000 Public D.B. US / Alternative USD50 Callan Associates, Wellington Management Co.Retirement System, Santa Ana, CA Hedge Funds San Francisco, CA

Orange County Employees USD8,000 Public D.B. US / Cash N/A Callan Associates, The Clifton GroupRetirement System, Santa Ana, CA San Francisco, CA

San Bernardino County (Calif.) USD6,200 Public D.B. US / Alternative USD50 New England Pension Pinnacle Asset ManagementEmployees Retirement Association, (All) / Commodities Consultants, Cambridge, MASan Bernardino, CA

MML012808 1/24/08 5:48 PM





San Bernardino County (Calif.) USD6,200 Public D.B. US / Alternative USD30 New England Pension Lehman BrothersEmployees Retirement Association, (All) / Commodities Consultants, Cambridge, MASan Bernardino, CA

School Employees Retirement USD11,690 Public D.B. Global / Alternative N/A Aksia LLC, New York, NY Diamondback Capital ManagementSystem of Ohio, Columbus, OH Hedge Funds

School Employees Retirement USD11,690 Public D.B. Global / Alternative N/A Aksia LLC, New York, NY Endeavor Capital ManagementSystem of Ohio, Columbus, OH Hedge Funds

School Employees Retirement USD11,690 Public D.B. Global / Alternative N/A Aksia LLC, New York, NY Taconic Capital AdvisorsSystem of Ohio, Columbus, OH Hedge Funds

School Employees Retirement USD11,690 Public D.B. Global / Alternative N/A Aksia LLC, New York, NY Och Ziff CapitalSystem of Ohio, Columbus, OH Hedge Funds

School Employees Retirement USD11,690 Public D.B. Global / Alternative N/A Aksia LLC, New York, NY Marathon Asset ManagementSystem of Ohio, Columbus, OH Hedge Funds

School Employees Retirement USD11,690 Public D.B. Global / Alternative N/A Aksia LLC, New York, NY Farallon Capital ManagementSystem of Ohio, Columbus, OH Hedge Funds

Tampa General Employees USD525 Public D.B. International / USD21 Mercer, Los Angeles, CA Aberdeen Asset ManagementRetirement Fund, Tampa, FL Active Equity

Tampa General Employees USD525 Public D.B. International / USD21 Mercer, Los Angeles, CA Victory Capital ManagementRetirement Fund, Tampa, FL Active Equity

Teacher Retirement USD115,000 Public D.B. US / Real Estate USD150 Unknown Morgan Stanley Real Estate FundSystem of Texas, Austin, TX

Teacher Retirement USD115,000 Public D.B. US / Real Estate USD200 Unknown Five Mile Capital PartnersSystem of Texas, Austin, TX

Teacher Retirement USD115,000 Public D.B. Asia / Real Estate USD100 Unknown ARA Asia Dragon FundSystem of Texas, Austin, TX

Teacher Retirement USD115,000 Public D.B. International / USD150 Unknown Prudential Real Estate InvestorsSystem of Texas, Austin, TX Real Estate

Workers Compensation Board CAD2,800 Permanent Fund Global / Active N/A Brockhouse & Cooper, Rogge Global Partnersof Alberta, Edmonton, ALB Fixed-Income Montreal, QE

Workers Compensation Board CAD2,800 Permanent Fund US / Active Equity N/A Brockhouse & Cooper, Analytic Investorsof Alberta, Edmonton, ALB Montreal, QE

Workers Compensation Board CAD2,800 Permanent Fund Global / Active Fixed- N/A Brockhouse & Cooper, Greystone Managed Investmentsof Alberta, Edmonton, ALB Income / Mortgage- Montreal, QE

Backed Securities

Terminated FirmsSearch Account

Firm Terminated Fund Name Status Assignment Size Consultant Comments/Firm Hired

RS Investments Adams County Retirement Plan Discontinued US / Active Equity / N/A Watershed Terminated RS Investments for unspecified reasons.Small-Cap Growth Investment Consultants

Janus Capital Corporation Adams County Retirement Plan Discontinued US / Active N/A Watershed Let go Janus Capital Corporation for unspecified reasons.Fixed-Income Investment Consultants

Private Capital Management Austin (Texas) Police Retirement Fund Completed Global / Multi Asset USD15 Consulting Services Thornburg Investment ManagementGroup

Lord Abbett & Co City of Naples (Fla.) Completed US / Active Equity / N/A Citigroup Rothschild Asset ManagementLarge-Cap Value

Western Asset Management El Paso County Retirement System Potential US / Active USD13 Watershed Terminated Western Asset Management Co. because it Fixed-Income / Investment provided insufficient diversification. WAMCO’s assets were Absolute Return Consultants reallocated to incumbents PIMCO, Loomis Sayles and SSgA.

Brandes Investment Partners Indiana Public Employees’ Discontinued Global / Active Equity / USD413 Mercer Terminating Brandes Investment Partners.Retirement Fund Micro-Cap Growth

The Boston Company Massachusetts Pension Reserves Discontinued US / Active Equity USD1,500 Unknown Fired Boston Company Asset Management and State Street Asset Management Investment Management Board Global Advisors due to personnel issues.

State Street Global Advisors Massachusetts Pension Reserves Discontinued US / Active Equity USD1,500 Unknown Terminated Boston Company Asset Management and State Investment Management Board Street Global Advisors due to personnel issues.

Firms On WatchSearch Account

Firm On Watch Fund Name Status Assignment Size Consultant Comments/Firm Hired

State Street Global Advisors Aurora City General Employees Potential International / N/A Callan Associates State Street Global Advisors was put on watch due to Retirement System Active Equity personnel changes.

MML012808 1/24/08 5:48 PM



allocation. New Jersey plans to deploy about$2 billion each to private equity, real estateand hedge funds by June. The searches arepart of an investment plan for fiscal year2008, which the State Investment Councilapproved Jan. 17.

Longer-term, the division intends to takeequity stakes in alternative asset managers.

Benefits include attractive returns, lower fees, a first look at co-investment opportunities, and direct access to managers’expertise as a means to develop internal capabilities over time.

Bill Clark, director of investments, is considering partneringwith institutional investors “to influence product design andterms offered by GPs within the alternatives space,” he wrote in acouncil memo. He is particularly interested in partnershipsinvesting in infrastructure, alternative energy and global financialinstitutions. New Jersey recently invested $700 million inpreferred shares of Merrill Lynch and Citigroup.

In private equity, New Jersey intends to make largercommitments to funds and reduce the number of relationships.“We are concerned that significantly greater diversification of thegeneral partner base will be difficult to oversee and may reduce

NEW JERSEY(continued from page 1)

its February board meeting. Additionally, the fund will discusscreating an emerging manager pool at that meeting. It’s too earlyto tell how much the plan could dedicate to emerging managersor hedge funds.

Doane aims to familiarize his board with some basic hedgefund strategies and what they try to accomplish. The fundrecently loosened some of its equity managers’ investmentrestrictions, changing their mandates to overlay and 130/30strategies (MML, 10/16). Doane believes that if trustees canunderstand these offerings and performance is good, then theywill also become comfortable with using hedge funds to deliveruncorrelated alpha. The initial allocation “would be a toe in thewater,” he said. He hopes to hire one or two managers by year’send. He is not certain whether they would be direct investmentsor funds of funds.

Doane wants to create a program to introduce managersand strategies with short track records or few assets. Theboard is reluctant to award mandates to such managers, butDoane thinks a program would be “a great breeding ground toaugment the portfolio.” In a recent absolute return bondsearch, he came across one manager which he thought wasvery good, but the board rejected the strategy as it only had$80 million under management.

Arkansas will interview finalists in its absolute return fixed-

ARKANSAS TEACHERS(continued from page 1)

rate of return.The $40 billion plan’s real return exposure consists of

Treasury-inflation protected securities. It is discussing expandingthe allocation to include commodities or other strategies,Greenberg said, and will probably start seeking managers soon.“Infrastructure is not on the immediate horizon, but we areconsidering it,” he added. He is not sure how large mandateswill be. Real estate and private equity targets are long-term andMaryland will invest with managers as new deals arise.

The fund will probably seek global equity managers sometimethis year, while the international equity increase will likely beimplemented through incumbent active or passive managers,Greenberg said. Incumbents include UBS Global AssetManagement, GlobeFlex Capital, Dimensional Fund Advisorsand State Street Global Advisors. As the fund is taking on moreinternational exposure, Greenberg is considering hiring acurrency overlay manager.

Greenberg expects to pare down the fund’s passive domesticequity and fixed-income investments, the majority of which aremanaged by State Street Global Advisors. He is unsure whetherthis will result in manager terminations.

—Anastasia Donde

MARYLAND(continued from page 1)

investment returns,” Clark wrote. To increase returns and lowerfees, the division wants to expand its co-investment programmanaged by BlackRock. The fund plans to commit $100-200 million to sustainable investments with a focus on alternativeenergy. “Given the political initiatives to reduce greenhouse gasemissions and the effectiveness of new technologies in this area,we believe that commitments to alternative energy projects offerthe potential for exceptional risk-adjusted returns,” Clark wrote.

For real estate, New Jersey will seek relationships with value-added and opportunistic U.S. managers. Clark has proposedestablishing a co-investment fund to invest directly in local realestate. New Jersey is also scouting for opportunities in Asia.

Clark has recommended investing $1.7 billion directly in hedgefunds, allocating 19% to credit strategies, 21% to distressed, 15%to event-driven, 24% to long/short and 21% to multi-strategy. Thefund has earmarked $250 million for funds of funds and is seekingemerging manager and activist strategies. “Most academic studiessupport the contention that smaller, less established hedge fundstend to generate superior returns,” Clark wrote.

Strategic Investment Solutions is the fund’s general andprivate equity consultant, while Cliffwater advises on directhedge funds, Rogerscasey on funds of funds and The TownsendGroup on real estate. —A.D.

Bill Clark

MML012808 1/24/08 5:48 PM



Quote Of The Week“A corporation works like an organism: if it’s bleeding in one area thewhole body will send what is needed to that area.”—DavidThomas, ceo of Equitas Capital Advisors, on the effect that aninvestment bank’s subprime losses could have on its asset managementsubsidiary (See Ask The Advisor, page 11).

One Year Ago In Money Management LetterJack Boyce, senior v.p., institutional investments at GE AssetManagement, told MML he was planning to hire a public fundmarketer to focus on the East Coast. [GE intends to hire a publicfund marketer in the first quarter of this year, said ChrisLinehan, spokesman. Boyce left GE in October after eight yearsto run AIG Investments’ U.S. institutional sales unit.]

17Percentage increase in State Street Global Advisors’ management fee

revenue in the fourth quarter of last year, despite facing lawsuits fromclients as a result of investment losses. Management fees generated by

SSgA stood at $297 million, up $44 million compared to Q4, 2006.

43Percentage of institutional investors that expect a recession, accordingto Debtwire’s 2008 Distressed Debt Market Outlook for North America

survey of 101 distressed debt market participants. Fifty-seven percent ofhedge funds and 70% of proprietary trading desks predict a recession.

100,000,000,000Approximate value, in dollars, of losses Wall Street firms have sufferedin the credit crisis. This is equivalent to 0.7% of gross domestic product.

194,000,000,000Amount, in dollars, that investors poured into hedge funds last year,although the pace slowed in the fourth quarter. Inflows in 2007 were

54% higher than the $126.5 billion the industry attracted in 2006.

CRUNCHINGthe numbers

income search next month. They are Drake Management,Goldman Sachs Asset Management, Loomis, Sayles & Co., andPutnam Investments. Doane expects to hire two firms for$250 million each to work alongside incumbents PIMCO,Western Asset Management and BlackRock. He is interested inunconstrained, “best ideas” strategies.

Separately, the fund will send RFPs this week to a group ofactivist managers to handle $200-300 million. Activist managerstend to have a “demonstrated ability to produce impressivereturns and can help in an effort to broaden the exposure awayfrom the dependence on traditional domestic equity managers,”Doane said. He will arrange for three or four activist managers tomeet with his investment committee in March. All moves arebeing funded via rebalancing. —A.D.

Nuveen has a $150 million war chest for test driving newinvestment strategies. “We have one of the largest budgets forincubation in the industry,” Anson said. “We eat our own cookingbefore we offer it out to a third party.” The Chicago firm isincubating 50-55 strategies, including small-cap, dividend growth,hedge funds and both fundamental and quantitative 130/30.

Anson weeded out closet indexers from CalPERS’ portfolio,which he described as “beta dressed up as alpha drivers.”Consequently, he wants Nuveen’s strategies to take active risk,which could involve running more concentrated portfolios. Anson,who joined Nuveen in September from Hermes PensionsManagement, aims to raise awareness of Nuveen’s alternativecapabilities. The firm’s strategies include long/short equity, market-neutral equity, credit arbitrage, convertible arbitrage, commoditiesand real estate. Subsidiary Symphony was the only firm to launcha collateralized debt obligation successfully in the fourth quarter.

Anson expects to add two to four marketers to Nuveen’s 64-strong Institutional Services Group, which promotes all seveninvestment subsidiaries. Nuveen will seek professionals withCFAs and MBAs who have worked at plan sponsors or ininstitutional sales. Scott Draper leads the team, which is split upregionally and by client type. Anson also wants to hireinvestment professionals.

Anson traveled to Norway two weeks ago to visit Norges Bankand this week he will deliver a speech to the Chartered AlternativeInvestment Analyst Association in London. CAIA has asked Ansonto write a textbook for its level-one qualification. His next trip willinvolve meeting clients in Sydney. Anson has published investmentpapers and will encourage colleagues to do likewise. “All [Nuveen’s]investment teams have excellent research,” he said. “Thoughtleadership is here already; it’s just a matter of harnessing it.”

Nuveen was taken private last year by an investor group led by

ANSON THROTTLES(continued from page 1)

Madison Dearborn Partners. Anson expects bankers to call onNuveen to suggest further mergers and acquisitions deals, so lastmonth the firm established an eight-strong M&A committee.“These ideas are going to come out of the woodwork hard andfast,” he said. No proposals are on the table, but he wants toremain open to opportunities. Nuveen has $170 billion undermanagement, including $38 billion from defined benefit pensionplans, foundations and endowments.

—Emma Blackwell

MML012808 1/24/08 5:48 PM

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