The California Public Employees’ Retirement System continues to look for fresh talent.
The $240 billion pension recently committed $150 million to Leading Edge Investment Advisors, a three-year-old San Francisco-based funds-of-funds firm that specializes in backing emerging managers, and $150 milllion to Quotient Investors in New York, a months-old quantitative equity management firm. Both firms tilt their strategies toward public equities—Leading Edge through new funds, and Quotient Investors through its own new vehicles, one of which is a large-cap fund, and a second fund that focuses on small-cap stocks.
Leading Edge was founded in July 2005 by Clayton Jue, who formerly oversaw the emerging managers program at the multi-bank holding company Northern Trust Global Advisors, where he first became acquainted with CalPERS. The nine-person firm will commit some of CalPERS’s investment across seven emerging stock funds whose research indicates the equities are undervalued. One is run by an Asian-American, one by an African-American, and another by a woman.
Last month, Leading Edge, which manages roughly $700 million in assets, was also hired by the $174 billion California State Teachers’ Retirement System, with which it has twice co-sponsored diversity surveys since 2005. And Leading Edge is also a finalist in an ongoing search by the roughly $5 billion Alameda County Employees’ Retirement Association, which is looking to allocate $50 million to an emerging manager-of-managers firm.
Jue said that while Leading edge “doesn’t fall into the category of private equity” right now, it is putting together a similar program on behalf of CalPERS that will fund emerging private equity vehicles, in addition to the public equity vehicles that make up the bulk of its business currently.
Each firm received its funding as part of CalPERS’s effort to back new vehicles that will, a la “American Idol,” introduce the pension to tomorrow’s stars. Leading Edge was backed under CalPERS’s emerging manager fund of funds program, which allows it to outsource the work of finding new, often minority-run fund managers. Quotient Investors is part of CalPERS’s Manager Development Program, a more direct investing program. Both funnel money to firms with assets of less than $2 billion so that CalPERS can attempt to tap into a wider diversity of ideas and range of firms.
Last month, the pension fund awarded $350 million to managers in the same programs. It committed $150 million to Philadelphia-based FIS Group, a 12-year-old funds-of-funds manager that backs emerging managers. FIS Group has nine funds in its current lineup, including three African-American owned firms and two owned by women. Another $200 million went to 10-year-old money management firm Redwood Investment Management of Stamford, Conn.—C.L.