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INV 3
Investment Committee Memorandum
Board of Regents, State of Iowa
Subject: Proposed Changes for Domestic Equity Fund Managers and Manager
Allocations
Prepared by: Pamela M. Elliott
Date Submitted: September 1, 2004
Recommended Actions:
Recommend the Board approve, for the institutional endowment portfolios:
1. Selection of Goldman Sachs Asset Management as the new large
capitalization domestic equity fund manager with an enhanced index
philosophy.
2. Selection of Lotsoff Capital Management as the large capitalization
domestic equity fund manager with an active, fundamental, bottom-up
philosophy.
3. Termination of Vanguard, the Board’s current large capitalization index
fund manager. Modification to the manager allocation section of the
Board’s investment policy as included in Attachment A.
4. Immediate modification to the manager allocation section of the
Board’s investment policy as included on page 4.
Executive Summary:
Previous Board
Actions
At its December 2003 meeting, the Board moved to sever the investment
relationships with Alliance Bernstein (international equity) and Invesco (a
domestic equity portfolio and a fixed income portfolio).
In February 2004, the Board approved:
• The selection of a new international equity fund manager.
• The selection of a new fixed income fund manager.
• The temporary transfer of Invesco’s domestic equity portfolio to
Vanguard, the Board’s large capitalization index fund manager.
Since the transition of the large capitalization domestic equity funds to
Vanguard was temporary, Wilshire Associates was asked to identify and
evaluate a small group of qualified large core equity fund managers.
Domestic Equity
Considerations
Institutional officials and Board Office staff worked with representatives from
Wilshire Associates, the Board’s investment advisor, to develop a strategy for
handling the large capitalization domestic equity portion of the endowment
portfolios.
Wilshire delineated search specifications for large core equity managers,
which included typical characteristics, benchmarked to the S&P 500 Index,
and three- to five-year performance expectations of at least 1% above the
benchmark.
Wilshire Associates identified and provided evaluation summaries for a small
group of qualified managers. A Regent fund manager selection group