MassPRIM Invests $150M in Emerging Hedge Funds

The pension system has selected three global macro funds for its first allocations to the program.

Brent Lewin/Bloomberg

Brent Lewin/Bloomberg

The state pension fund for Massachusetts has invested $50 million each in a trio of firms for its emerging hedge fund manager program, the first allocations the pension has made through the program since the search was approved nearly two years ago.

The Massachusetts Pension Reserves Investment Management Board (known as MassPRIM) has invested in three managers: London-based Alcova Asset Management, New York-based CKC, and Boca Raton, Florida-based Global Sigma. The firms did not respond to requests for comment in time for publication.

“In all three cases, they are doing something we don’t have” in the portfolio, MassPRIM’s chief strategy officer Eric Nierenberg told Institutional Investor in an interview. Nierenberg said the goal of the program was to find managers who are employing eclectic strategies that are not easy to find and don’t necessarily scale.

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The pension system initially approved a request for proposal for outside advisers for the program in late 2016 and issued the RFP about a year later. It hired NewAlpha to advise on hedge fund manager due diligence and Innocap to provide managed account services. The pension made the initial allocations to the three funds this past September.

For the emerging hedge fund manager mandate, MassPRIM defines “emerging” as those managing less than $500 million. Nierenberg noted that the fund does not do day-one investments in the program; firms need to have been in operation, with live trading, for 18 months. The investments are placed in a managed account format, which is how the pension manages about 80 percent of its hedge fund investments, Nierenberg said.

He acknowledged that sourcing and vetting emerging managers takes a good deal of legwork, but said the external consultants have helped with screening and due diligence.

Nierenberg said the program eventually hopes to invest $500 million. It is aiming to reach that target over the next 12-18 months.

MassPRIM managed $73.8 billion through the end of September, including $6.2 billion in hedge funds.