The investment committee of the Massachusetts Pension Reserves Investment Management board, at a Feb. 11 meeting, voted to recommend more than $1.3 billion in allocations to bank loans and venture capital.
The full board is slated to approve those recommendations at a meeting scheduled for Feb. 27.
The investment committee recommended the board hire Ares Management and Beach Point Capital Management to actively manage $800 million and $400 million respectively in bank loan mandates.
Chuck LaPosta, PRIM’s director of fixed income, told the committee that funding for those mandates will come almost entirely from existing bank loan mandates.
PRIM’s website lists two current bank loan managers: Eaton Vance Institutional Funds and Voya Financial.
LaPosta said with current bank loan allocations of just over $1 billion, roughly 1% of PRIM’s $110 billion in portfolio assets as of Dec. 31, “this will be moving almost the entirety of our bank loan portfolio.”
While LaPosta didn’t give a reason for the move, he told the committee that the blended fee for the new strategies would be 10 basis points less than the fees PRIM currently pays its bank loan managers.
According to materials distributed to the investment committee, Ares has $463.7 billion of assets under management, including $5.0 billion in the bank loan strategy PRIM is moving to allocate funds to. Beach Point Capital Management has $18.2 billion in AUM, with $1.7 billion in its bank loan strategy.
The investment committee likewise approved a commitment of up to $125 million to Tiger Iron Capital Bay State Fund, a $2.9 billion manager that invests in early stage venture capital managers.
Helen Huang, a senior investment officer on PRIM’s private equity team, said the commitment is in line with PRIM’s determination to complement its allocations to proven core venture capital firms with high quality general partners at earlier stages of their development.
Separately, Michael McElroy, PRIM’s director of public markets, told the committee that PRIM decided to terminate one of its emerging markets managers, T. Rowe Price, due to "relative under performance, while a second manager, Brandywine Global, decided to wind down their U.S. micro-cap value portfolio in the fourth quarter and return our capital.”
At the time of liquidation, Brandywine and T. Rowe were managing $152 million and $219 million of PRIM money, respectively.
