BOSTON — The $36 billion Massachusetts Pension Reserves Investment Management Board shook up its high-yield bond lineup last week, terminating W.R. Huff from a $300 million portfolio and leaving Fidelity Management Trust Co. the odd man out as it distributed that money among its remaining high-yield bond managers.
A dispute over $48,000 in consulting fees led Boston-based PRIM to fire W.R. Huff Asset Management Co. LLC, Morristown, N.J., a distressed debt manager.
Fidelity, meanwhile, lost out on its $75 million share of the Huff allocation after failing to satisfy PRIM's staff that recent news of Fidelity traders accepting "excessive" gifts from brokers hadn't left PRIM paying more for its trades than necessary.
The decision to snub Fidelity appears to have been a recent one. The materials PRIM board members received for their Feb. 1 meeting called for Fidelity to share the Huff portfolio equally with the three other high-yield managers.
Less than a week before the board meeting, Fidelity informed the board that the gift controversy — which officials had thought was limited to equity traders — extended to the firm's high-yield trading desk as well, said Stan Mavromates, PRIM's acting chief investment officer. Fidelity has said that four of the 16 traders involved were terminated, but 12 — including two high-yield traders — remain, Mr. Mavromates noted.
Fidelity spokeswoman Anne Crowley declined to confirm the details. Ms. Crowley said Fidelity understands the need for PRIM to do its due diligence, and values its relationship with the fund.
Despite Boston-based Fidelity's assurances, "the jury's still out" on whether PRIM's $350 million large-cap domestic equity portfolio or its $350 million high-yield bond portfolio with the firm "have been impacted by the conduct of Fidelity traders," said Executive Director Michael Travaglini. "We're going to continue a dialogue to see if we can get the comfort we need to make an informed recommendation to the board."
By contrast, the PRIM jury came back last week on the question of W.R. Huff and, having failed to settle differences over $48,000 in consulting fees, the verdict was termination.