MassPRIM plans to go heavy in private equity this year; names new PE chief

Massachusetts Pension Reserves Investment Management Board named Michael McGirr as director of private equity, replacing Michael Bailey.

Executive director and chief investment officer Michael Trotsky told the $87 billion pension’s investment committee Tuesday that Bailey’s last day was Friday.

Bailey accepted a position with Fidelity Investments as a portfolio manager in its alternatives product development group, a Fidelity spokesman confirmed with Buyouts. He will start work later this month.

Bailey ran the system’s private equity program since 2013. In 2019, the program was named the best-performing in the nation by the American Investment Council, a private equity trade group, as Buyouts reported. Last year, it came in second.

Trotsky also announced senior investment officer Michael McGirr was promoted to take over the role of private equity chief. McGirr worked at MassPRIM since 2014. Before that, he had tenures at Bain Capital and Minnesota State Board of Investment.

Later in the meeting, McGirr thanked MassPRIM staff and board members for their “guidance and support” and said Bailey “treated me as a partner.”

“I’ve been intimately involved with managing every part of this program,” he said.

Program success and expansion

MassPRIM’s private equity program had good performance for 2020 and is set to grow in the next year.

As of December 31, the program had a market value of $10.3 billion. Gross of fees, it had a 26.4 percent one-year return over 2020, including 11.5 percent in the fourth quarter. Private equity returns are reported on a one-quarter lag.

McGirr told the committee this was the best one-year performance for the program since 2014.

Earlier in the meeting, the committee voted to boost the target range for the private equity program to 11 percent to 17 percent. That will get final approval from the full MassPRIM board later this month. Its current weight is 12.6 percent.

The 2021 private equity strategy targets commitments of between $2.1 billion and $2.7 billion in 2021. Last year, the fund committed just over $2 billion.

The fund also wants to raise the fund’s co-investment capacity to $480 million, and to have 20 percent of fund commitments be in co-investments. The team plans to research new strategies in private equity, including how to scale co-investments.

McGirr also said the fund plans to hire more members of the private equity team. Last year, MassPRIM added analyst Eliza Haynes, as Buyouts reported. The team also consists of analyst Sarah Zatoonian and investment officer Alyssa Fiore.

Push for diversity

Trotsky also announced that David Gurtz, the deputy chief investment officer and director of public markets, would be spearheading an effort to increase the diversity and inclusion of MassPRIM’s managers, including the private equity program.

The initiative is in response to a bill signed by Massachusetts Governor Charlie Baker last month which requires the fund to increase the diversity of its investment managers to at least 20 percent, according to a press release from state treasurer and MassPRIM board chairwoman Deborah Goldberg.

Gurtz told the board MassPRIM increased its allocation to diverse-owned managers from about $1 billion to nearly $5 billion overall in the last five years. The private equity program currently has $1.2 billion of its assets with diverse managers, or nearly 11 percent.

“We are making progress but there is still much more to go and much more to do,” Gurtz said.

Action Item: read more about MassPRIM’s diversity and inclusion policies here.