The PBGC is launching a pilot program to give smaller firms a chance to manage some of its $85 billion trust fund portfolio, starting with fixed income, agency officials said Monday at a pre-bid conference in Washington.
Requests for proposals under the Smaller Asset Managers Pilot Program are expected to be issued June 15.
The Pension Benefit Guaranty Corp. will hire up to five managers to run between $50 million and $250 million each in U.S. core fixed income. Chief Investment Officer John Greenberg said he expects to award two or three contracts within a year. “We want it done as soon as possible,” he said. While he expects to hire more managers “down the line,” he stressed that it is a pilot program.
Eligible firms must have a minimum of $250 million in assets under management, including at least one tax-exempt institutional account with $25 million or more. Allocations will not exceed 20% of a firm's AUM. Other requirements include a five-year performance history and willingness to act as a fiduciary.
The trust fund is one of two PBGC investment funds. It receives assets from terminated pension plans. Unlike the $20 billion revolving fund, which invests PBGC premium payments in Treasury securities, trust fund assets can be more flexibly invested, including in equities, debt obligations and real estate. The PBGC has a 70% target allocation for fixed income and 30% for equities and other non-fixed-income assets.
“What we are looking for is good risk-adjusted return after fees,” Mr. Greenberg said. “We like low fees, but that's a part of the negotiations.”
Wilshire Consulting is the agency's investment consultant, “but it's a staff decision,” he said.