By Baird Helgeson

Poor performance cost a financial company its contract handling part of the state's stock portfolio.

The Minnesota State Board of Investment voted Monday to end its contract with Mellon Capital Management in San Francisco after the company's investments fell below expectations.

Mellon, which invested about $238 million of state money, lost about 14 percent in the stock market during the last year, said Jeff Bailey, chairman of state's Investment Advisory Council, which helps the state manage its investments. The state expected a 6 percent profit from those investments.

"The manager had been underperforming for a good year or two and there have been some changes in their organization that we didn't feel were as productive going forward," Bailey said.

Investment board staff closely watched Mellon's performance since it bought the previous investment manager, Franklin Portfolio Associates, about four years ago. The state had contracted with Franklin and then Mellon for about 15 years.

As a company policy, Mellon officials don't comment when contracts are terminated, said spokeswoman Patrice Kozlowski.

The state lets go of an investment manager once or twice a year, Bailey said.

About 25 investment managers handle the state's $18.2 billion domestic stock portfolio.