Mass. PRIM Caps Manager Assets
February 3, 2010
The trustees for the Massachusetts Pension Reserves Investment Management Board (PRIM) approved a “manager sizing policy” yesterday that will “prudently protect the assets” of the $42.6 billion Pension Reserves Investment Trust (PRIT) Fund from “firm risk.”
Currently, the PRIT consists of the Capital Fund and the Cash Fund, the PRIM Board recommendation reads.
The new guidelines lay out that no firm will permanently manage assets that represent 10% of the PRIT fund for actively managed accounts and 25% for passively managed accounts. Hybrid firms, which consist of both passive and active strategies, will be limited to 15%. And should a rebalancing of assets occur, the manager would not be eligible to receive additional funds.
Additionally, the risk initiative also states that assets managed by firms “shall not represent more than 20% of the investment manager’s total assets under management.”
The Board recommendation states that the only exceptions to the rule include PRIM’s small and emerging managers program, the targeted investment program and the timber asset class, primarily because they have very few investment managers.
Furthermore, the recommendation highlights that “no firms…are in violation of this policy.”
Currently, asset allocations for PRIM include 24.9% to domestic equity, 19.7% to international equity, 12.7% to fixed-income, TIPS, and commodities, 10.6% to real estate, 9.2% to alternatives, 7.4% to high-yield debt, 5.5% to absolute returns, 5.3% to emerging markets and 4.7% to timber and natural resources.
Separately, at the Feb. 2 Board meeting, the PRIM Board and its investment committee announced that Crestline Investors, EIM Management (USA) and Strategic Investment Group were terminated from their contracts, effective Dec. 31. For the most part, the group has been associated with the state pension system since 2006 under a “portable alpha mandate,” its Web site stated.
Catherine Gropp, state Treasurer Timothy Cahill’s assistant director of communications, said in an email today that the trio were not let go “due to performance, but due to a strategic change.” She highlighted that in June 2009, PRIM eliminated the mandate after the asset class underwent allocation revisions.
In total, the $1.6 billion freed up from structural changes was distributed Jan. 1 to The Rock Creek Group, a Washington, D.C.-based firm that has incorporates a hedge fund of funds strategy for PRIM since 2004, Gropp said.
“The Rock Creek [Group] is being retained to liquidate the former hedge fund portfolios,” Gropp said. “This is a short-term assignment.”
IMW’s attempts to reach Crestline and Strategic for comment were unsuccessful as of press time. Officials at EIM declined comment.
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