Mass Pension Board Approves New Emerging Manager Program
More Investment Emphasis to be Placed on Smaller and Women/Minority-Owned Firms
Treasurer Steven Grossman, Chair of the Massachusetts Pension Reserves Investment Management (PRIM) Board, today announced that the Board has approved a plan aimed at increasing investments with smaller money management firms. The “Emerging Manager Program” also places an emphasis on investments with women and minority-owned enterprises.
“Emerging Managers add value when compared to their larger and more established competitors because they are innovative, more nimble, and less burdened by the bureaucratic decision-making processes of many larger organizations,” said Grossman. “This new initiative will enhance shareholder value and open up opportunities for a host of dynamic and successful management firms.”
An Emerging Manager is generally defined as an investment manager with less than $2 billion in assets under management. Many of them have been in existence for less than three years. Emerging Managers exist in a number of asset classes, including hedge funds, private equity, venture capital, and real estate.
“This is part of our overall effort to improve the performance of the Massachusetts pension fund,” said PRIM Executive Director Michael Trotsky. “We are excited to identify an opportunity that can improve our investment performance while at the same time advancing a worthy policy goal. That’s a two-for-one!”
While PRIM has had a policy in place since 2004 that targets Emerging Managers in private equity, today’s move by the Board will create a broad policy to include them in all asset classes and also enhance consideration for minority and women-owned investment firms. In addition, the Board also approved a goal of investing between five and ten percent of all new and current investments with Emerging Managers. Under the plan, PRIM will retain an advisor to help identify key Emerging Managers that will assist in maximizing the pension fund’s performance.
The existing private equity Emerging Manager program has invested approximately $400 million to date, a figure that Grossman and Trotsky said will increase substantially with outreach to new asset classes. PRIM also currently has a $700 million investment in PAAMCO, a fund-of-funds that targets Emerging Managers. The new policy approved by the Board today will also encourage PAAMCO to pursue opportunities with competitive minority and women-owned firms.