WHC creates new trust.

African American-owned pension consulting firm Washington Hackett Co. (WHC) has established a manager-of-managers commingled investment trust fund that is believed to be the first of its kind with an international investment component. Called the Emerging Manager Trust Group, the fund mandates that at least one-third of its brokerage business be done with minority broker/dealers. The trust hopes to play a role in helping minority-owned asset management firms secure a foothold in the industry.

Christian M. Washington, principal at New Orleans-based WHC, says the firm is still finalizing the selection of the asset management firms that will invest the trust's assets. He anticipates at least two-thirds of the firms chosen will be minority-owned.

The trust features five commingled funds: a fixed-income fund, a growth fund, a value fund, a small capitalization equity fund and a global fund. Three to five "emerging managers" will be selected to manage each fund, (The term "emerging manager" was coined by WHC in the late '80s as a euphemism for minority managers.) The funds will invest in various domestic and international equities, intermediate bonds and mortgage-backed securities.

Toni Hackerr Antrum, the firm's other principal, says the trust is targeting public pension funds and corporate pension funds that can allocate from $25 million to $50 million or more to be managed. "We would like to receive $1 billion to manage over a five-year period," she says. "Since we're not just offering one product or one style, we feel that goal is not unrealistic." The fund managers will share approximately 50% of the annual fees charged to investors.

Washington says WHC uses a rigorous process to select its firms. Each principal portfolio manager must have a five-year investment track record. Each firm must rank in the top 40% of its investment style and have less than $500 million under management. Though he acknowledges that the trust's criteria for its managers would not fulfill the manager search criteria of many mainstream pension plans, he is confident that the trust's overall design will undermine most of the arguments against hiring these firms, e.g., "The manager's style doesn't fit."

Commingled trusts have proven effective in helping young minority-owned asset management firms get a start in the industry. The structure mitigates some business risks by spreading asset allocations to the trust among several firms, H a c kett says, "This trust is a good vehicle for investors who are sensitive to the issue of leveling the playing field for minority managers."