The Board of Trustees for the Maryland State Retirement & Pension System, Baltimore, has approved a policy to formally include the system’s emerging manager program into its investment policy manual.
The $70.4 billion pension fund in 2007 started the Terra Maria Developing Manager Program with an initial $330 million allocation. The program now has $5 billion in assets, representing over 7% of Maryland’s total plan assets.
“A program this large and of this duration should be included in the investment policy manual,” Chief Investment Officer Andrew Palmer said in a Nov. 19 memorandum to the board.
Over the 12 months ended Oct. 31, the Terra Maria program returned a net 21.8%, ahead of its 21.5% benchmark, according to board meeting materials.
In codifying the emerging manager program, the system is pioneering a model of best practices proven to yield investment returns and recognizing the program’s success in increasing diversity among the managers with whom it partners, the pension fund said in a news release.
“This decision reflects our unwavering commitment to ensure that small and diverse asset management firms have a lasting and impactful role in managing the state’s retirement portfolio, driving value for our beneficiaries and fostering equity within the investment landscape,” said Dereck Davis, state treasurer and chair of the system’s board, in the news release.
The newly-added policy language outlines the program’s structure, fiduciary responsibilities and key objectives, including enhancing portfolio returns, fostering diversity and supporting the growth of next-generation investment managers, according to the news release.
The Terra Maria strategy seeks to enhance the total portfolio’s risk-adjusted return by accessing smaller, often diverse firms, that may otherwise face barriers to entry through the traditional institutional investment processes, according to the news release.
“The Maryland State Retirement and Pension System’s success is based on our people and our investment partners,” said Executive Director Martin Noven, in the news release. “Our long-standing commitment to diversity represents the best of all possible worlds. We are provided with access to unique investment opportunities with insightful, emerging managers who might be overlooked, while simultaneously cultivating the next generation of investors.”
Moving forward, the system will produce an annual report on the Terra Maria program’s performance, which will include performance metrics for each manager relative to benchmarks; a breakdown of assets by asset class and manager allocation levels, and any new hires during the year.
