Mass PRIM Achieves 9.9% Return in Fiscal 2024

The Massachusetts Pension Reserves Investment Management board announced Tuesday that its PRIT fund returned 9.9% in the fiscal year that ended June 30, boosted by strong equity and private equity returns.

The fund’s assets rose to $105.3 billion, a record for the PRIT fund, a pooled investment fund consisting of the Massachusetts Teachers’ Retirement System, State Employees’ Retirement System and a series of county, municipal and other public pension funds in Massachusetts.

Despite the positive return, the fund slightly underperformed its 10.3% benchmark. PRIM CIO Michael Trotsky noted that the underperformance can be attributed to weaker private equity returns; that asset class returned 9% in the fiscal year.

Trotsky also noted that five out of seven asset classes outperformed their benchmarks. Global equities were the other asset class to miss its benchmark, returning 18.4%, relative to 18.7% for the benchmark. Trotsky and Michael McElroy, PRIM’s director of public markets, attributed underperformance due to the fund being underweight the Magnificent Seven technology stocks.

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Core fixed income in the PRIT portfolio was flat in the fiscal year with a 0% return, value-added fixed income returned 11.2% and timberland returned 10.6%. Real estate lost 6.2%, but even with that negative return, the real estate portfolio outperformed the 10.8% loss on its benchmark.

In Tuesday’s meeting, Trotsky noted that slowing fundamentals and higher interest rates hurt the real estate asset class, and he attributed the fund’s outperformance in that class to the fund being underweight to offices and the West Coast market, both of which have been weaker performing, while being overweight to industrial real estate.

In the second quarter of the calendar year, the fund’s emerging markets equities outperformed U.S. equites, driven by China and Indian equities. Indian equities returned 10% for the quarter and 18% for the year, and McElroy noted that the fund was not able to capture as much returns as they could have from a boom in Chinese equities due to being underweight China and Taiwan, while having higher allocations to other emerging markets like Mexico and Brazil, where equities did not perform as well.

McElroy noted that the fund has about $1 billion allocated to China. At a time when investments in China are coming under scrutiny from lawmakers, decisions to reduce the allocations would likely be up to the fund’s managers.

Over the past three, five and 10 years as of June 30, the PRIT fund returned an annualized 4.2%, 8.5% and 7.8%, respectively, against benchmarks of 4.5%, 7.4% and 6.8%. Trotsky noted that weaker three-year returns relative to the benchmark were due to fiscal 2021 dropping off the three-year reporting period; the PRIT fund returned 30% that year.

In fiscal 2024, the fund deployed $6.6 billion in capital across new and existing managers, the largest amount in the fund’s history. The fund allocated $2.3 billion to emerging managers and, as part of the fund’s future initiative, allocated $250 million to emerging diverse managers. In total, the fund allocates $12.6 billion to these managers, or 12% of the PRIT fund, which Trotsky noted was the fourth largest allocation to these managers in the nation.