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North Dakota Goes Passive, Calamos Struggles With Outflows

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cloudsIt has been reported that on October 25, the North Dakota State Investment Board decided to drop several of its active equity mandates in favor of passive strategies, citing fees and performance issues.

The results are that State Street Global International Alpha and Clifton EAFE Index mandates have been switched to a Pure Passive MSCI World ex-US mandate. Also, UBS Emerging Market Equity and PanAgora Diversified Risk Emerging Markets Equity Plus mandates have been switched to passive mandates.

The Board, which manages the assets of the North Dakota Public Employees Retirement System, is not alone among large pension funds and other public investors that have moved their equity strategies to more passive mandates.

Notably, the Board decided to “transition the assets currently managed by Calamos [Investments] to the existing Epoch Global Choice mandate due to poor performance and organizational changes at Calamos,” according to minutes made available on the Board’s website. Darren Schulz, the then interim CIO, made the recommendations to the Board.

Calamos received its low-volatility global equity mandate in January 2012, when the Board decided to change from Calamos’s convertible bonds mandate.

The organizational changes the Board cited are most likely in reference to James Boyne’s announced departure from Calamos. James Boyne joined Calamos in 2008 and eventually became the firm’s President and COO. He left in September of 2013.

Another headline-making departure was that of Nick Calamos, nephew of Calamos founder John Calamos Sr., who resigned his post as co-CIO in 2012. He remained a member of the board until early December 2013, when he decided to officially leave the firm, sell his shares and engage in philanthropic pursuits.

Calamos in particular has posted some unpleasant net outflows in recent quarters: US$ 2.5 billion, US$ 2.3 billion and US$ 980 million in Q1, Q2 and Q3, respectively, according to an October earnings call: rather sizeable outflows for the US$ 27.5 billion asset manager.

The Board, which manages the assets of the North Dakota Public Employees Retirement System, is not alone among large pension funds and other public investors that have moved their equity strategies to more passive mandates.

The California Public Employees’ Retirement System (CalPERS), with US$ 270.5 billion in assets under management, as of September 30, 2013, is a leader in the press and among peers. Their returns since embracing passivity have been met with expectations and their codifying of this belief in passive strategies in a white paper titled “CalPERS Investment Beliefs” suggests they will continue moving more equity allocations toward indexing, and where they tread, surely more institutional investors will follow.

China’s Central Bank Creates Macro-Prudential Management Bureau

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The People’s Bank of China (PBOC) created a new department to oversee and attempt to eliminate financial risks to the system. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Like its U.S. Peers, Legg Mason Seeks to Trim Costs

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Legg Mason Inc., a Baltimore-based asset manager, has announced a reduction in workforce as is prepares to streamline operations and save money. Legg Mason’s leadership commented that assets under management fell 5 % year-on-year. Legg Mason currently manages US$ 727.2 billion (as of December 31, 2018), which is down from the previous US$ 767.2 billion. CEO Joseph A. Sullivan noted that a global operating platform will centralize fund administration, IT, and other departments that work with affiliates. Sullivan did not discuss the number of layoffs expected, or specify which areas would be impacted. Legg Mason disclosed they planned to close a quarter of its exchange-traded funds in March 2019. These three ETFs include a U.S. strategy, emerging markets, and a developed markets strategy outside the U.S. However, these funds run around US$ 28 million in assets under management.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Monetary Authority of Singapore Establishes Corporate Governance Advisory Committee

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On February 12, 2019, the Monetary Authority of Singapore (MAS) revealed the creation of a Corporate Governance Advisory Committee (CGAC). CGAC was formed to advocate for good corporate governance practices among listed companies in Singapore. Bobby Chin, Director of Singapore Telecommunications Limited, will be the Chair of CGAC. According to a MAS press release, “CGAC will identify current and potential risks to the quality of corporate governance in Singapore.”

MAS formed the Corporate Governance Council (Council) in February 2017. The Council was dissolved after it pushed out a publication of its final recommendations on August 6, 2018.

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