MassPRIM Names Russell as FX Transaction Manager

(December 7, 2011) — Massachusetts Pension Reserves Investment Management (MassPRIM) board has selected Russell Implementation Services to manage a portion of the fund’s foreign-exchange (FX) transactions.

“We are very excited to be working with Russell as they help PRIM lower the overall cost of our FX transactions and help us lower the costs our standing instruction FX transactions,” Stanley P. Mavromates, Chief Investment Officer of MassPRIM’s Board, told aiCIO.  

Earlier this month, Russell Investment earned aiCIO Magazine‘s Asset-Management/Service Innovation Award for its FX services. 

MassPRIM’s board hired the firm to manage FX transactions conducted by the $48.1 billion Pension Reserves Investment Trust fund, which the Boston-based board oversees. The board hired Russell to “execute foreign-exchange trades” with a focus on MassPRIM’s private equity and distressed debt investments. The pension board selected Russell to handle a 5% portion of its most costly currency trades, according to the Boston Globe. Meanwhile, the scheme voted to reduce the amount of foreign exchange trading that BNY Mellon handles on its behalf. 

In October, MassPRIM hinted at aims to find another FX partner, revealing that it may drop BNY Mellon as its partner for foreign-exchange trading. “We are testing the market to see what other options are available to us,” said Michael Trotsky, executive director of the fund, to the news agency. “We want to see if we can do a better job,” he added, saying that the scheme aims to interview a range of candidates this month to replace BNY Mellon after issuing a request for proposals. 

The news followed assertions by State Treasurer Steven Grossman, who claimed the custodial bank overcharged MassPRIM tens of millions of dollars on foreign exchange trading since 2000. BNY Mellon has denied the accusations. “We reject the notion that [MassPRIM] was ‘overcharged,’” the bank said in a statement. “We value our client relationships and are confident that we offer our clients and their investment managers competitive and attractive FX pricing.”

Custodial banks have battled heightened scrutiny in recent months. The top custodial banks in the United States — BNY Mellon and State Street — continue to fight claims that they took advantage of pension schemes when providing foreign-currency trading services in recent years. Earlier this month, aiCIO reported that State Street Global Markets’ (SSgM) Ross McLellan and Edward Pennings – global head of SSgM’s portfolio solutions group and head of the Europe, Middle East and Africa solutions group, respectively – left the company following a pension fund’s inquiries into fixed-income trading costs during a transition.