The Massachusetts Pension Reserves Investment Management board issued an RFP today for an alternative investments consultant. Pathway Capital Management, PRIM's alternatives consultant for 15 years, will not rebid because company officials have decided to focus on private equity fund of funds rather than non-discretionary accounts, said Michael Travaglini, executive director of the $43.1 billion fund. The RFP is available on PRIM's website at www.mapension.com/Rfp/RFP.htm. Doug K. Le Bon, a senior managing director for Pathway, wasn't immediately available for comment. Candidates can e-mail proposals to Wayne D. Smith, MassPRIM's head of alternatives, at [email protected] The deadline is 3 p.m. EST Nov. 1.
PRIM staff also provided details of the pension fund's potential losses from the recent implosion of Amaranth Advisors, one of more than 130 hedge fund firms used by PRIM's five hedge fund-of-funds providers. CIO Stan Mavromates said Ivy Asset Management had $34 million of PRIM's $475 million separate account with Amaranth, and Rock Creek Group had $22.5 million of PRIM's $405 million account with the firm. PRIM "expects to lose at least 70%" of that money, or about $40 million, said Mr. Mavromates. Such a loss would shave about 10 basis points from the pension fund's assets under management, said Mr. Mavromates. Initial discussions with Ivy, Rock Creek and consultant Cliffwater suggest that Amaranth's losses were simply due to a poor investment decision rather than any type of fraud, the CIO said.
PRIM will work with Cliffwater to examine whether any of the guidelines governing PRIM's hedge fund of funds contracts should be adjusted, Mr. Mavromates said. Kathleen K. Barchick, a managing director with Cliffwater, noted that even with the Amaranth losses, PRIM's absolute return program has returned an annualized 8.6% since its inception roughly two years ago, exceeding its hedge fund of funds' index by 50 basis points.
Finally, the board approved an investment of up to $75 million in a new private equity fund, KKR 2006. Kohlberg Kravis Roberts is looking to raise more than $14 billion for the fund.