The Massachusetts Pension Reserves Investment Management Board (MassPRIM) is planning to search for emerging markets equity managers later this year, putting some $1.5 billion in play. The pension fund, which had $54.4 billion in assets as of July 31, will consider replacing three of its existing managers due to poor performance.
MassPRIM staff told its investment committee at a Sept. 24 meeting that they plan to issue requests for proposals sometime in December, according to spokesman Eric Convey. The fund approved the searches last year but never moved forward with the process, Convey said. “Investment staff is generally dissatisfied with the performance of its emerging markets equity portfolio,” he said. Meeting materials noted that MassPRIM’s active core emerging markets equity managers have “delivered disappointing performance,” adding that they “are not very active, and offset one another.”
As of July 31, three firms collectively handled MassPRIM’s active emerging markets equity investments: Ashmore Group ran $473.4 million, GMO ran $517.93 million, and T. Rowe Price ran $560.59 million, according to fund documents. Officials at Ashmore and GMO did not respond to requests for comment, while a spokeswoman for T. Rowe said that the firm does not comment on client relationships. MassPRIM staff said at the meeting that Ashmore, GMO, and T. Rowe would be invited to rebid for the mandates, according to Convey.
Ashmore returned 6.35% in the one-year period ending July 31, beating the MSCI EM Standard Index’s 2.19%, but underperformed in the three-year period, returning 0.11% compared to the benchmark’s 1.01%. T. Rowe Price beat the benchmark for the one-year and the three-year periods, returning 2.78% and 1.55%, respectively, while GMO returned 1.6% for the one-year period and 1.03% for the three-year period. Despite outperforming their benchmarks for some periods, MassPRIM noted in its meeting materials that the managers have “performed poorly… in all time periods in terms of returns and PRIM’s custom rank.”
In addition to its active core emerging markets equity managers, MassPRIM has a $1.7 billion passive investment with State Street Global Advisors. That account will not be put out to bid with the three active mandates.
HF Consultant Search In the Works
At the same meeting, MassPRIM’s investment committee approved a search for direct hedge fund consulting services, Convey said. The decision is pending authorization by the full board in October. The fund’s contract with its current hedge fund consultant, Cliffwater, is scheduled to expire on April 5, 2014. If given the greenlight, MassPRIM will issue an RFP for direct hedge fund consultants and hire one firm for a three-year contract with options for extensions.
The investment committee also voted at the meeting to commit $100 million to Cantab Capital Partners, a global macro hedge fund. Pending approval by the full board, MassPRIM will invest in Cantab’s CCP Core Macro Fund, which trades liquid futures and forward contracts. The UK-based asset manager is targeting a 12% gross level of volatility and an expected net return of 8-10% for the $682 million macro fund, according to MassPRIM documents. As of April 30, MassPRIM had allocated 9.3% of its entire portfolio to hedge funds, below its 10% target.
MassPRIM’s full board will also consider the investment committee’s recommendation to extend its contract with asset allocation consultant NEPC for one year. The contract is set to expire next April. If approved, MassPRIM will not put the contract out to bid for another year.
Article originally appeared in Money Management Intelligence. Link here (paywall).