Finance commission reviews four finalists to replace Western Asset as investment manager

The South Pasadena Finance Commission on an unspecified date heard detailed presentations from Morgan Stanley, BlackRock, Invesco and Payden & Rygel as it considers replacing Western Asset as the city’s day‑to‑day investment manager.

The selections matter because the manager oversees reserve funds and short‑term portfolios that affect yield, liquidity and reporting for the city’s operating and reserve accounts. Commissioners focused on net returns, service and how each firm would operate inside the city’s investment policy.

Brian Longpre, a Morgan Stanley liaison who has worked with the city for more than a decade, laid out Morgan Stanley’s sample portfolio and fees. The Morgan Stanley sample emphasized corporate and taxable municipal allocations and proposed a sample fee of about 16 basis points. Longpre cautioned against “chasing that ‘fool’s gold’ of the short‑term interest rates,” arguing for a balance between short‑term yields and longer‑term returns.

BlackRock’s sample portfolio showed a more conservative mix, with higher allocations to U.S. Treasuries and lower corporate exposure; Longpre and staff noted BlackRock’s sample fee at about 22 basis points. Invesco’s sample likewise favored a heavier Treasury allocation and came in near 17 basis points. Payden & Rygel, a Los Angeles‑based firm that presented as an alternative one‑stop manager, quoted roughly 11 basis points in the meeting packet.

Commissioners and staff discussed several practical differentiators: reporting platforms, local coverage and how each manager sources yield inside the city’s allowable investments. Morgan Stanley uses the Clearwater reporting platform; BlackRock uses Aladdin; Morgan Stanley’s Century City team led by Drew Zager was presented as locally based and highly responsive. BlackRock’s named portfolio manager for the strategy, Michael Hanratty, is Bay Area–based; Invesco’s portfolio manager was described as Colorado‑based. Payden & Rygel emphasized local presence and in‑house reporting and compliance capabilities.

Finance Director William clarified the current fee layers: Morgan Stanley, Western Asset and the custodian Zions Bank have historically shared fees and staff noted that earlier fee ratios reflect a much smaller portfolio. Commissioners pressed staff and the presenters to provide apples‑to‑apples comparisons that include advisory layers and any pass‑through costs.

A public commenter, Josh, urged caution on projecting investment income in the general fund and endorsed the presenters’ warnings about short‑term yield chasing. Commissioners agreed to digest the packets and return a ranked recommendation to the City Council; Treasurer Zen said the commission intends to come to an agreement and forward a recommendation to council.

The commission did not take an immediate vote; instead members asked staff to circulate unmarked materials and to schedule follow‑up so commissioners can rank finalists before making a recommendation.

Looking ahead, staff and commissioners discussed scheduling a decision to align with upcoming council meetings and budget deadlines so the council can consider the commission’s recommendation without delaying other agenda items.