MassPRIM Withdraws $1.1 Billion From BlackRock Due to Poor Performance in Fixed-Income

(December 8, 2010) — The $46.8 billion Massachusetts Pension Reserves Investment Management (MassPRIM) has withdrawn $1.1 billion from BlackRock’s active core domestic fixed-income portfolio.

MassPRIM said the move comes as a result of poor performance by the world’s biggest money manager. BlackRock managed nearly 8% of MassPRIM’s overall assets, overseeing $3.6 billion for the plan, including $1.3 billion already in the passive fund and a similar amount in inflation-protected securities, according to a memo released at a board meeting, as reported by Bloomberg.

Spurred by concerns about the firm’s core fixed-income product, the fund’s board temporarily moved the more than $1 billion to a Barclays Capital Aggregate Bond index account ahead of MassPRIM’s annual asset allocation review in the first two months of 2011. The memo released at MassPRIM’s board meeting described a “diminished emphasis on core fixed income” at BlackRock, which MassPRIM hired in 1999. “PRIM staff lacks confidence that the firm is adequately focused,” the memo said, estimating a fee savings of $1.1 million a year.

While the BlackRock fund gained 5.48% over the past five years, the Barclays index returned 6.2%, the memo said. For the calendar year through September, it trailed by just 0.01 percentage point, at 7.93% to 7.94%, according to the memo.