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Porter County advisers recommend replacing two active managers; board approves switch to Schwab fundamental index
Summary
Capital Cities told Porter County trustees the portfolio ended March near $197.3 million, recommended eliminating AQR and GMO in favor of a Schwab fundamental U.S. large-company index to reduce mega-cap concentration and save fees, and the board voted to approve the change.
The Porter County Foundation Board voted to replace two active U.S. large-cap managers with a Schwab fundamental index fund after a Capital Cities adviser presented first-quarter performance and a portfolio-construction review.
Capital Cities told trustees the portfolio ended March 31 at about 197,300,000 and recorded a small quarterly decline; the firm said steady Federal Reserve policy and geopolitical volatility had depressed returns in the quarter. "You ended March 31st in that blue row at 197,300,000," the Capital Cities presenter said while reviewing the fund summary.
The presenter recommended eliminating two diversifying active funds — AQR and GMO — and combining their allocations into a single Schwab fundamental U.S. large-company index. "Eliminate two of these funds, the GMO fund and the AQR fund, in favor of one single fund," the adviser said, arguing the move would reduce concentration in mega-cap names, preserve defensive characteristics and lower annual fees by about $68,000.
Trustees questioned trailing performance and how the new weighting would change exposure. The adviser said the S&P 500 allocation would remain (about 13.6% of the portfolio) and that AQR (about 9.4%) and GMO (about 8.5%) would combine into approximately an 18% allocation to the Schwab fundamental fund, which holds roughly 700 stocks.
A motion to drop AQR and GMO and implement the Schwab fundamental strategy was moved and seconded; the board took a roll-call vote and the motion carried.
The adviser emphasized that Capital Cities serves as the board's investment adviser and cannot act without trustee authorization unless the board grants discretionary authority. The presenter said discretionary authority could speed routine manager swaps but would require a contract change and trustee deliberation.
Next steps include updating the portfolio allocation in the board minutes and coordinating any operational steps needed to implement the manager changes.
