New York State Pension Plan Fires BlackRock Russell 1000 Alpha Tilts Fund

The New York state retirement fund, the nation’s third-largest public pension, fired a BlackRock Inc. fund that managed $1.6 billion in equities, according to Comptroller Thomas DiNapoli.

The plan’s investment was terminated in October, according to a monthly transaction report published today by DiNapoli’s office. DiNapoli is the sole trustee of the $132.8 billion fund.

Firing BlackRock “was part of an asset reallocation strategy where we are reducing our exposure to public equities,” said Olayinka Fadahunsi, a New York-based spokesman for DiNapoli. Fadahunsi didn’t know why the BlackRock fund was chosen out of those run by 11 outside managers of investments in companies with large market values.

The BlackRock Russell 1000 Alpha Tilts large-cap account was the plan’s biggest in that category among U.S. equity funds under outside management, the system’s annual report shows. The Alpha Tilts fund aims to outperform the Russell l000 index using a so-called quantitative strategy where it varies weightings of shares or sectors based on patterns or market signals, Brian Beades, a company spokesman based in New York, said by e-mail.

“We can’t comment on our client actions,” said Jessica Greaney, a BlackRock spokeswoman in New York.

More Investments

BlackRock also managed $2.05 billion of investments in smaller U.S. companies and $4.02 billion of international equities as of March 31 for the pension fund, according to the plan’s most-recent annual report. The report shows it has more than 1 million members and beneficiaries.

BlackRock is the world’s largest money manager with $3.45 trillion of assets. The pension has invested in the Alpha Tilts fund since November 2001. BlackRock has lost other pension business recently.

Last week in Massachusetts, the board overseeing state pension assets voted to drop BlackRock as the manager of about $1 billion in bonds, citing concern that the firm isn’t adequately focused on some fixed-income markets. The company still manages more than $2 billion for the Massachusetts plan.

After the New York fund’s investments lost 26 percent in 2009, its worst-ever performance, it announced plans to reduce holdings in U.S. equities to 30 percent. As of March 31, about 39 percent of its assets were in U.S. shares, according to the annual report.

Lower Allocations

The fund also lowered its allocation goals for international equities to 13 percent of assets from 16 percent, the annual report shows. Allocations were increased for private equity and real estate. The plan also set up new categories for investments in real assets such as farmland, gold or infrastructure, and an “opportunistic portfolio” for assets that don’t fit in the other groups.

In the year ended March 31, the BlackRock Alpha Tilts fund’s investment return of 49.6 percent was less than the 51.7 percent for all domestic equities it held and the 52.8 percent achieved by other active managers in that group, the annual report shows. The Russell 1000 Index returned 51.6 percent for the 12 months through March 31, including reinvested dividends, according to data compiled by Bloomberg.

During the past five years through March, the BlackRock fund’s 1.35 percent annual rate of return was less than the 2.2 percent for all domestic equities held by the plan and the 1.6 percent of active managers, according to the pension plan’s annual report.

The BlackRock fund’s returns were also less than the Standard & Poor’s 500 index for the one and five-year periods, the report shows.

BlackRock Instititonal Trust collected $3.98 million of fees from the New York fund for managing domestic equities and $3.47 million for investing international shares in the year through March, according to the plan’s annual report.

To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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