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On Friday, the California State Teachers’ Retirement System (CalSTRS), which is the second-largest pension fund in the United States, announced its decision to withdraw approximately $1 billion from Western Asset Management Company (Wamco). The move comes as a response to criminal fraud charges filed against Ken Leech, Wamco's former star trader.
CalSTRS, managing assets worth $353 billion as of January 31, has initiated the process of pulling out all its investments from Wamco, according to Bloomberg, citing an email statement. This decision is based on an evaluation of risks and returns within its fixed-income portfolio, as stated in an email from CalSTRS. Previously, during the summer, Wamco managed the largest portion of CalSTRS' fixed-income investments, valued at $1.1 billion.
Wamco has experienced a series of significant withdrawals since late August, following the announcement by Franklin Resources Inc (NYSE:BEN)., its parent company, of a potential enforcement action against Leech. This has triggered one of the most substantial upheavals in the bond market in recent times, with an estimated $120 billion withdrawn from Wamco through January.
Several other institutions, including Ohio’s Bureau of Workers’ Compensation, the Chicago Teachers’ Pension Fund, and the Dallas Employees’ Retirement Fund, have also decided to retract their investments from Wamco. Following these changes, UBS Group AG (NYSE:UBS), BlackRock Inc (NYSE:BLK)., and LM Capital Group have become the primary managers of CalSTRS' fixed-income portfolio.
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