MassPRIM Developing AI Model to Aid Investing

What is the best use of artificial intelligence for allocators? Try helping a pension fund make investment decisions.

Asset owners are increasingly interested in AI, although mainly for clerical tasks. But not Massachusetts Pension Reserves Investment Management, the $22.2 billion investment fund that manages the assets of multiple Bay State retirement plans. The fund just announced plans to develop an artificial intelligence model to help it gather and manage data for investing, as well as management functions.

The AI model would be trained on decades of MassPRIM’s data, according to committee members during the organization’s January 30 meeting.

According to the fund’s stated 2024 objectives, it wants to explore “incorporating AI into PRIM’s business processes and evaluate potential solutions” and look into “applications of large language models in investment analysts/monitoring processes.”

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

At the meeting, staffers mentioned that development of the AI tool would continue over the year, but they noted these would be “baby steps” toward integrating artificial intelligence into the fund’s operations.

Some pension fund CIOs say they are mainly using the technology for note-taking and developing meeting summaries, but using AI for making investment decisions is something in which they are increasingly interested. The board at MassPRIM intends to dive into it now.

Mass PRIM Reports 6% Gain in Fiscal 2023 to Raise Asset Value to $96.6 Billion

How Will AI Change Institutional Investing?

Tags: AI, Artificial Intelligence, Massachusetts Pension Reserves Investment Management (MassPRIM)

The APRA is putting under review its practices for valuation of unlisted assets, including private equity, commercial real estate and infrastructure.

Australia’s pensions regulator will conduct a “deep dive review” of funds’ exposures to unlisted assets in the A$3.6 trillion ($2.4 trillion) superannuation industry this year, it announced Wednesday.

Combining its policy and supervision priorities for the first time to give regulated entities a better idea of what to expect in the year ahead, the Australian Prudential Regulation Authority stated it is focused on “protecting the safety and resilience of regulated entities, promoting confidence and stability in the financial system, and supporting the community to achieve good financial outcomes.”

As part of this effort, the APRA pinpointed asset valuation and liquidity management practices in announcing it expects investment governance processes to be sound. According to the regulator, it will conduct its own review of such practices, looking at the material unlisted asset exposures of a variety of large and mid-sized funds.

This review follows the APRA’s introduction of the requirement for funds to revalue their unlisted assets on at least a quarterly basis. This occurred around the same time the Financial Regulator Assessment Authority criticized funds’ approach to valuing unlisted assets in the wake of fall 2022 Canva Pty Ltd. write-downs, as well as the APRA’s oversight of the issue.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

The review is expected to cover investments in commercial property, private equity and credit, as well as the likely liquidity risks associated.

Alex Dunnin, executive director of research at the Sydney-based Rainmaker Group, says the review “is entirely reasonable but should not be overstated.” Rainmaker Group, like CIO, is owned by ISS STOXX.

APRA data show its regulated super funds have just 16.4% of assets—less than A$400 billion—in unlisted assets. Of those assets, unlisted property accounts for just 29%, unlisted infrastructure 41% and unlisted equity accounts the remaining 30%.

“While the regulator has reviewed valuation practices for unlisted assets recently and found no red flags, what may have stirred renewed concern is investment industry surveys revealing fund investment chiefs to be claiming devaluations in unlisted office property are overstated and that they expect minimal further falls,” Dunnin says.

“These survey results seem out of step with market reality, and APRA is right to explore what’s going on, given office property is about half the unlisted property sector,” he says. “But given how so many market observers seem to not understand how the unlisted assets market actually works, how and through what structures these assets are held, and how valuations actually occur, by whom and how often, anything APRA could do in their deep dive to educate the broad market about these dimensions would be very useful.”

The update on priorities comes as Australia’s total retirement savings pot marches steadily towards A$4 trillion.

Statistics released by the APRA Wednesday show total super assets hit A$3.57 trillion last financial year, close to A$1 trillion of which is in low-fee default MySuper products.

Total contributions into MySuper products in the year through June 30, 2023 were A$134 billion, while A$76 billion was paid out in benefits. The average account balance in a MySuper product is just shy of A$64,000, while the average balance overall is A$111,380.

This article initially appeared in our sister publication, Financial Standard.