Local Government Superannuation (LGS) has terminated its entire hedge fund manager line-up and moved a portion of its Australian equities portfolio into passive management.
The fund's hedge fund porfolio managed $425 million in funds under management.
Following the changes, four managers including Barclays Global Investors, BlackRock, Warakirri Asset Management and Chifley Financial Services have been terminated.
The move was a result of poor returns and the sector effectively delivering returns correlated with the equity markets, LGS chief executive Peter Lambert said.
Macquarie Investment Management will manage a $200 million customised mandate investing in high quality credit.
The fund is still looking to invest the remaining cash, Lambert said.
LGS has also mirrored a decision in January when it moved part of its international equities into passive management. A portion of its Australian equities portfolio will now be passively managed.
Barclays Global Investors (BGI) will manage a $280 million passive mandate resulting in the termination of two existing mandates with BlackRock. BGI currently oversees a $260 million enhanced passive mandate for LGS.
The portfolio overhaul now has BGI managing over $500 million for the fund.
"We found that a large number of managers effectively replicated each other's stock positions. We were getting the performance of index funds but with the active management fees," Lambert said.
Australian equities represents about 20 per cent of the fund's $5 billion portfolio.
