BOSTON — Massachusetts Pension Reserves Investment Management Board on Aug. 6 terminated five active managers that ran a combined $1.8 billion in concentrated portfolios with high tracking errors as part of a strategic shift in the $50.6 billion system's domestic equity program to index funds and portable alpha.
Terminated were Legg Mason Inc., Gardner Lewis Asset Management LP, NWQ Investment Management Co. LLC , Mazama Capital Management Inc. and Ariel Investments.
Large-cap value managers Legg Mason and NWQ ran $638 million and $348 million, respectively, as of June 30, and Gardner Lewis managed $348 million in large-cap growth. Small-cap managers Mazama Capital handled $242 million in growth and Ariel, $246 million in value.
CIO Stan Mavromates called the change an attempt to fix a domestic equity program that was “broken,” having underperformed its benchmark for the past five years. He said it's just a matter of time before PRIM gets out of the active long-only domestic equity business.
John Larson, a managing director with Gardner Lewis, said “obviously we're disappointed” that a “long and mutually beneficial relationship” with PRIM is coming to an end, but “we understand that it's a strategic decision.” Officials with the four other terminated managers either declined comment or couldn't immediately be reached.
The board rejected as “too aggressive” general consultant Cliffwater's recommendation to fire all 11 active U.S. equity managers. Mr. Mavromates said PRIM will stick with remaining managers Pacific Investment Management Co., AXA Rosenberg Investment Management LLC, EARNEST Partners, INTECH, Numeric Investors LLC and Putnam Investments for now, provided they continue to perform well.
