A member of the Massachusetts Pension Reserves Investment Management Board‘s investment committee urged staff to take note of new alternative investment firms being run by diverse managers as the $90 billion pension embarks on a major diversity and inclusion initiative.
C LaRoy Brantley said diverse firms were starting to get “traction” in their share of total investment fees due an increasing number of these firms arising in alternatives, which tend to have higher fees.
“What you’re seeing now is a preponderance of these managers coming out in the alternative asset classes, where the fees tend to be a bit more expensive because you’re paying for a skill set as opposed to paying for a manager to beat a public benchmark,” said Brantley, who is also a managing principal with Meketa Investment Group.
“You’re also seeing a lot more diverse managers go into these fields because that’s a better highlight of their investment skills when it’s more alpha-driven than being on top of a beta-driven market.”
Brantley’s comments came during a presentation on MassPRIM’s new diversity and inclusion initiative, dubbed FUTURE.
Deputy chief investment officer David Gurtz said the program will have three keys to future success: reducing the barriers to diverse managers, improving the sourcing pipeline of diverse managers, and enhancing measuring and tracking of comprehensive diversity and inclusion information.
“We need to signal to all diverse managers that we are open to do business here at PRIM,” Gurtz said.
Gurtz announced the launch of a new page on the MassPRIM website where managers can manually submit information about their firms, which will then be uploaded to the pension’s internal database. As Buyouts reported, tracking information about firms’ diversity and inclusion is a critical part of improving performance in that department.
“Opening up so that the managers can come on your website and introduce themselves instead of having to go through some channels that they may not know of, I think that’s a dramatic step forward,” Brantley said.
The pension system will also choose advisors for each asset class. Gurtz said staff would come to the board with recommendations for these advisors in the next three to six months.
The system will also increase its monitoring of outside firms’ diversity and inclusion practice with an enhanced questionnaire as part of its due diligence process.
The initiative was first announced in February, shortly after passage of a law including a requirement that MassPRIM increase the diversity of its investment managers and consultants to at least 20 percent. State treasurer and MassPRIM board chair Deborah Goldberg helped push for this amendment.
According to Gurtz’s presentation, about 6 percent of the fund’s assets were allocated to diverse managers as of March 31, valued at $5.3 billion. That includes 11 percent of MassPRIM’s PE portfolio, or about $1.4 billion.
Brantley and Goldberg expressed approval for the plan.
“It is a step in the right direction, and I really look forward to positive results,” Goldberg said at the meeting Tuesday.
Action Item: read the materials from the March 4 MassPRIM investment committee meeting here.