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Massachusetts Pension Reserves Investment Management board's investment
committee voted Tuesday to recommend that the full board approve boosting
the Boston-based $49.8 billion retirement system's direct investments in
hedge funds by about $2.7 billion over the next 15 months, terminating four
of PRIM's five hedge fund-of-funds managers in the process. Sponsored Links*
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According to the agenda materials for the investment committee meeting,
obtained by *Pensions & Investments*, the committee unanimously voted to
recommend that the full board terminate hedge fund-of-funds providers Arden
Asset Management, K2
Advisors<http://www.pionline.com/section/researchcenter-profiles&dir=money-manager&page=overview&R=38525>,
Grosvenor Capital Management and Rock Creek Group as the system looks to
reduce both manager overlap and fees by investing directly with hedge
funds. As of Feb. 29, those firms' allocations from PRIM stood at $556
million for Arden, $811 million for K2, $719 million for Grosvenor and $743
million for Rock Creek. The investment committee voted to retain hedge
fund-of-funds manager PAAMCO, which was managing $720 million for PRIM as
of Feb. 29. PRIM's agenda materials for the investment committee meeting
noted that PAAMCO's focus on “emerging hedge fund managers” made that
portfolio “highly complementary” to the PRIM board's direct hedge fund
program. The agenda materials recommended that the full board retain a
hedge fund transition manager, and encouraged all five of PRIM's current
hedge fund-of-funds manager lineup to bid on that assignment. The gradual
liquidation of PRIM's hedge fund-of-funds allocations would be accompanied
by a boost in direct investments in the 21 hedge fund managers the board
selected since October. On other matters, the investment committee voted to
recommend that the full board consider hiring emerging markets small-cap
equity managers Wasatch
Advisors<http://www.pionline.com/section/researchcenter-profiles&dir=money-manager&page=overview&R=35311>
to
run $140 million and Acadian Asset
Management<http://www.pionline.com/section/researchcenter-profiles&dir=money-manager&page=overview&R=34075>to
handle $60 million. An RFP was issued in November. However, the
committee also voted to recommend that the full board issue an RFP for
active core emerging markets equity managers to “conduct a restructuring of
the (retirement system's) active core emerging markets equity portfolio,”
according to the agenda materials. The move reflects the fact that PRIM's
existing lineup of active emerging markets equity managers “have not fully
met staff's performance expectations,” according to the agenda materials.
Those materials show Ashmore Emerging Markets
Management<http://www.pionline.com/section/researchcenter-profiles&dir=money-manager&page=overview&R=34459>,
which oversaw $481 million as of Jan. 31, and Grantham Mayo Van Otterloo,
which oversaw $539 million, both trailing their benchmarks over the past
one-, three- and five-year periods, with T. Rowe Price, which managed $554
million, outperforming for the one- and three-year periods but
underperforming over the past five years. Separately, following the
system's RFP in January for long-only investment consulting services, the
investment committee voted to recommend that the full board choose Callan
Associates, noting that firm's “extensive” experience with public plans,
familiarity with the risk system's PRIM uses and competitive fees, among
other strengths. Callan's proposal called for combined fees, over the
three-year life of the contract, beginning April 3, of $834,543. The
MassPRIM board is expected to consider the committee's recommendations
April 3.

*Peter Lacalamita *


Arlene Busch

202-333-1880

abusch@rosemontseneca.co