The Massachusetts Pension Reserves Investment Management Board, which manages the state’s pension reserves investment trust fund, announced at its May 30 board meeting that it achieved a 3.7% return in the first quarter of 2024.
Assets of the fund reached $104.2 billion at the end of the quarter, which PRIM CIO Michael Trotsky noted was the largest balance in the history of the fund.
The PRIT fund returned 11.4%, 6.0%, 8.9%, and 8.0% annualized over the past one, three, five, and 10 years, as of March 31, 2024.
In the first quarter, U.S. large cap equities were the best performing asset class, returning 10.6%. U.S. small and mid-cap equites returned 6.9%, and developed international equities returned 4.6%. Emerging markets equities returned 4.3%.
The fund’s private debt assets returned 3.4%, while portfolio-completion strategies and private equity returned 3.1% and 2.7% respectively. Emerging market debt and U.S. high yield assets both returned 2.4%.
Timberland and short-term fixed income returned 0.3%, while real estate returned a negative 2.3%, and U.S. Treasury STRIPS negative 6%. Inflation linked bonds also had negative returns, as did core fixed income, returning negative 0.2% and negative 2.3%, respectively.
Manager Selection
The PRIM board approved $3.5 billion in new commitments, with about $2 billion in commitments to credit managers and more than $400 million in follow-on commitments to existing managers. The board also approved $600 million in commitments to private equity managers, and $175 million to portfolio-completion strategies.
Global Equities
The board approved $1.2 billion in commitments to global equities managers, approving initial allocations of $400 million each to C WorldWide Asset Management, PineStone Asset Management and Walter Scott & Partners as part of a world ex-U.S. growth equity mandate.
Funds for the commitments will be sourced from the existing $9.7 billion developed international equity portfolio, specifically its actively managed portion, which comprises 78% of the portfolio. In total, 12.3% of the portfolio will be reallocated to the three managers.
Multi-Asset Credit
The board also approved $2 billion in allocations to several managers as part of a multi-asset class credit strategy, which will be a strategy under the value-added fixed-income portfolio of the fund.
Initial allocations of $300 million were approved to Anchorage Capital Advisors, $600 million to HPS Investment Partners, and $500 and $200 million to two KKR credit funds, Multi-Asset Credit and Global Credit Opportunities.
Another $400 million allocation was approved to Shenkman Capital Management as a part of the multi-asset class credit strategy.
The board also approved an initial allocation of $200 million to Morgan Properties’ Morgan Properties Separately Managed Account as part of a separate credit opportunity. The fund’s strategy is to acquire Freddie Mac B-piece securities, which are the most junior tranche of Freddie Mac mortgage loan securitizations.
The funds for the multi-asset class credit strategy will be sourced from the existing public value-added fixed-income portfolio. The fund will reduce its allocation to high-yield bonds by 1 percentage point and bank loans by 1 percentage point to fund a 2-percentage-point increase in allocation to multi-asset credit.
Portfolio-Completion Strategies
A commitment of up to $175 million was approved to Eidos Partners’ Eidos Italian Distressed Loan Fund III, which was a follow-on recommendation, PRIM had previously allocated to fund II.
Eidos’ strategy is to acquire small pools of non-performing loans which are secured by residential and commercial real estate located in Italy. This is the only commitment made to the fund’s portfolio completion strategy portfolio, which is a pool of hedge fund and real asset allocations.
Private Equity
The PRIM board approved an investment recommendation to allocate $100 million to Five Elms Capital Five Elms Fund VI, a growth equity software private equity investment. Five Elms is a new manager for PRIM.
The fund also approved three follow-on investments, two of which will be allocated to Thoma Bravo. The board approved $200 million to Thoma Bravo Fund XVI, and $125 million to Thoma Bravo Discover Fund V. PRIM has previously allocated to 17 prior Thoma Bravo funds.
The third follow-on investment will be allocated to Stone Point Capital’s Trident X fund, which will receive a commitment of up to $175 million. The fund has a focus on investing in middle market financial services companies in North America.
Requests for Proposals
The board of PRIM approved the issuance for a request for proposal for REIT investment managers. The goal of the RFP is to select one or more managers to provide long-only U.S. REIT exposure for PRIM, which would fall under the fund’s real estate and timberlands portfolio.
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Tags: Mass PRIM, Massachusetts, Massachusetts Pension Reserves Investment Management, Pension Reserves Investment Trust fund, Pensions, PRIT, PRIT Fund
