Massachusetts Pension Reserves Investment Management Board, Boston, on Tuesday terminated RREEF from a $678 million core real estate separate account because of continued portfolio manager turnover at the firm, said Timothy V. Schlitzer, PRIM's senior investment officer for real estate and timber.
An RFP will be issued June 14 for a core real estate manager to replace RREEF, Mr. Schlitzer said. The RFP won't detail a specific mandate size, as the new manager and the $44.2 billion system's four remaining real estate separate account managers will be allowed to bid for any of the existing 22 assets from RREEF's mandate.
According to agenda materials handed out to the board, Peter Feinberg, the RREEF portfolio manager overseeing PRIM's assets, resigned April 20 to join Invesco as a portfolio manager, less than a year after Mr. Feinberg replaced Liz Cole in that capacity.
RREEF executives proposed an interim replacement as well as a six-month suspension of fees for MassPRIM, but the prospect of a fourth portfolio manager in roughly three years left MassPRIM investment staff concerned about the firm's ability to retain the talent needed to sustain what has been strong long-term performance, Mr. Schlitzer said.
Since MassPRIM hired the firm in 1995, RREEF's returns have topped its benchmark by an annualized 90 basis points. RREEF will continue to manage a $284 million REIT-focused separate account for the system.
Mayura Hooper, a spokeswoman with RREEF parent Deutsche Asset Management, declined to comment on client matters.
The core real estate assets will be managed by LaSalle Investment Management on an interim basis, while the board moves to hire a permanent replacement by the end of this year. LaSalle already manages $671 million for MassPRIM; the board temporarily suspended its existing 30% limit ceiling because LaSalle, with the assets formerly managed by RREEF, could now manage as much as 37% of MassPRIM's real estate holdings.
Also on Tuesday, the board approved a search to replace Michael Travaglini, who will resign as executive director on June 11 to join Chicago-based hedge fund-of-funds firm Grosvenor Capital Management.
The board's administration and audit committee on May 20 unanimously recommended that Karen Gershman, MassPRIM's COO and CFO, be named permanent executive director, with a salary of $280,000, as of June 14, citing the need for continuity and stability. But Robert Brousseau, the board member who chairs that committee, said the governor's office expressed an interest in a broader search, with input from a compensation consultant, and the board will move expeditiously to conduct that search. Ms. Gershman will assume the executive director's duties on an interim basis.