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Passive tilt for Massachusetts state fund

The $42 billion Massachusetts Pension Reserves Investment Management (PRIM) will move half of its developed non-US equity portfolio and 25 per cent of its emerging market equity portfolio into passive strategies and has begun a search for a single manager for each asset class with a commencement date of May.

For the non-US equity portfolio the size of the mandate will be $1.5 billion, while emerging markets will be up to $600 million.

In developed equities the fund currently employs eight investment managers for US and international equities, although State Street Global Advisors is the only passive manager, with mandates in both asset classes.

Its emerging markets allocation is currently entirely actively managed by three managers, Emerging Markets Management, GMO and T Rowe Price.

The fund’s long term target allocation is 49 per cent global equity, 13 per cent core fixed income, 6 per cent value-added fixed income, 10 per cent private equity, 10 per cent real estate, 4 per cent timber/natural resources and 8 per cent hedge funds.

The move to passive will bring investment management of its emerging market and developed non-US equities in line with a strategic investment policy

The fund is also looking for a manager for its economically targeted investments program, which was established in 2003, and currently has $270 million invested, with the aim of seeking investments that benefit the “Commonwealth as a whole”.

At the moment it invests in a well-diversified portfolio of fixed income, real estate, and alternative investments. Although in its early stages the program makes claim to have created more than 2,500 jobs and issues more than 1,400 mortgages among low-moderate income home buyers, among other things.

Ennis Knupp is the fund’s advisor.

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