The Massachusetts Pension Reserves Investment Management Board launched the first phase of a cost-saving and return-enhancing program that follows in the footsteps of public funds from other states that, in turn, are following in the footsteps of several Canadian plans.
Phase 1 initiatives of Project SAVE include renegotiating some public equity and hedge fund manager contracts to reduce fees for the $53.9 billion Boston-based fund; investing in hedge funds rather than hedge funds of funds and exploring more passive hedge fund strategies; looking at more private equity co-investing; establishing a cash overlay; and restructuring how the fund handles claims-filing procedures and recovery from class-action litigation proceeds.
“I noticed we spend a significant amount of time talking about returns, and although that's very important, we never took an in-depth look at our cost structure,” Michael Trotsky, MassPRIM's executive director and chief investment officer, said in a telephone interview. “Not all initiatives are just around cost savings; we're looking broadly at how we're running our business.”
Project SAVE, which stands for strategic analysis for value enhancement, was created by Mr. Trotsky earlier this year to find ways to reduce costs and potentially increase returns for MassPRIM. Some of these initiatives have been implemented; others are scheduled to go into effect in early 2014. MassPRIM expects these Phase 1 initiatives to either save the fund or provide return enhancements of $101.2 million per year.