Massachusetts Pension Reserves Investment Management board today terminated hedge fund-of-funds managers Austin Capital Management and Ivy Asset Management.
Austin, which ran a $130 million portfolio for PRIM’s portable alpha program, was dropped by the $37.8 billion Boston-based fund, which cited a loss of confidence in Austin’s due-diligence procedures after losing $12 million on money allocated to Bernard L. Madoff Investment Securities.
Austin’s promise to visit its underlying hedge fund managers at least once a year was part of a risk regime that had convinced PRIM to award the firm $170 million in September, but PRIM subsequently learned that Austin hadn’t visited Madoff’s firm since 2005, CIO Stan Mavromates told fund trustees.
With the mandate in a commingled vehicle, recovering PRIM’s money could take three years or more, Mr. Mavromates said. Eventually, that money will be distributed to the two other managers PRIM hired along with Austin in August: Blackstone Alternative Asset Management and EIM.
Robert L. Wagner, president and CEO of Austin parent Victory Capital Management Inc., declined to comment.
Ivy, which managed $430 million in an absolute-return portfolio, was terminated for weak performance and persistent high-level turnover.
With MassPRIM’s overall absolute-return allocation at 5.6%, above its 5% target, roughly $350 million of the money Ivy allocated to hedge fund managers will be liquidated and redeployed, Mr. Mavromates said. The remaining $80 million will be given to other managers in PRIM’s absolute-return lineup.
An Ivy spokesman declined to comment.
