Massachusetts PRIM Proposes $1 Billion Investment to Boost Diversity in Managers

Massachusetts’ $95.7 billion state pension fund has preliminarily approved a plan to invest up to $1 billion in emerging-diverse managers over the next two years. The move is part of the Massachusetts Pension Reserves Investment Management (PRIM)’s initiative to abide by the state’s investment equity law, which contains a target of at least 20% diversity among PRIM’s vendor base.

“The PRIM team, by investing $1 billion into its emerging-diverse managers program, is taking important steps in addressing the inequities endemic in the financial services sector,” State Treasurer Deborah Goldberg, who is also the chair of PRIM’s board, said in a statement. “This is real and tangible progress that will reduce barriers and expand opportunities for diverse investment managers.”

This year, PRIM has allocated $2 billion to established diverse managers, including as much as $1 billion to Boston-based investment management firm RhumbLine Advisers, which is a female- and minority-owned institutional investment management firm. If PRIM’s board approves the recommendation made by the pension fund’s investment committee, five different firms—each representing one of the fund’s asset designations—will help direct money to emerging-diverse managers. The board will vote on the recommendation on Thursday.

The five firms that have been designated to help source, conduct due diligence, and monitor investment managers are Hamilton Lane for private equity, Bivium Capital for fixed income, Cambridge Associates for real estate, Xponance Inc. for global equities, and PAAMCO, which will invest in emerging-diverse hedge fund managers for PRIM.

Earlier this year, the PRIM board voted to raise its standards for diversity among the boards and employees of the companies it invests in. PRIM said it will vote against or withhold a vote from all nominees of a portfolio company’s board if less than 35% of the board is diverse in terms of race, and if it is less than 35% diverse in terms of gender. PRIM’s previous policy was to vote against or withhold a vote if less than 35% of the board was diverse in terms of race and gender combined.

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Along with the board diversity policy, the pension fund also added a policy that requires at least 20% of a portfolio company’s employees to be diverse in terms of race and at least 20% of employees of the company to be diverse in terms of gender. PRIM also requires that at least 20% percent of suppliers, contractors, and vendors used by a company be minority-owned businesses, and that at least 20% of suppliers, contractors, and vendors used by a company be woman-owned businesses.

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Tags: Deborah Goldberg, Diversity, Massachusetts Pension Reserves Investment Management (MassPRIM), Pension Funds, RhumbLine, Treasurer

On Friday, the World Health Organization (WHO) dubbed coronavirus variant B.1.1.529 a “variant of concern,” sending markets swinging over the Thanksgiving weekend. The variant, better known as Omicron, was first discovered in South Africa, but has made its way into at least 15 other countries, including three cases in Canada and nine in the UK. While many countries have implemented travel bans to prevent the spread of Omicron, studies have shown that they aren’t effective at keeping viruses out in the long run.

For investors, this news is concerning. In the short term, the stock market is seeing increased volatility. On Friday, the S&P, Dow, and the Nasdaq fell 2.3%, 2.5%, and 2.2%, respectively. The indexes seem to have partially rebounded, with the S&P climbing 1.3%, Dow climbing 0.7%, and the Nasdaq climbing 1.9% by the close of Monday, but the situation remains precarious.

In the long run, however, things seem difficult to predict for institutional investors. Nick Moakes, CIO of Wellcome Trust, a London-based charitable foundation focused on health care research, says that other than maintaining higher than usual cash balances, there’s not much else he plans on changing at the moment. It’s not that Moakes wouldn’t want to shield his investments if he knew for a fact that Omicron would cause a significant economic collapse. He already made those moves back in January 2020 when scientists first warned about COVID-19’s potential to lead to a pandemic.

The issue, according to Moakes, is that it’s still much too early to tell how severe the Omicron variant will be. There are multiple different paths it could take, ranging all the way from significantly more dangerous than the original strain of the virus to significantly less dangerous.

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Still, as far as shielding investments goes, Moakes said he is convinced that the virus is no longer the biggest threat. “In the portfolio, we are now much more focused on the risks from inflation and from economic policies put in place to combat lockdowns than we are on COVID itself,” he wrote via email.

Moakes said he also believes the pandemic has left a strong legacy on market volatility. “Markets are now highly sensitive to news on the science and are arguably overreacting to the individual twists and turns,” he said. And he also thinks this oversensitivity is here to stay. “This is now endemic in society and we will have to get used to dealing with it—including places that have pursued a zero COVID strategy.”

But while we have all learned the danger of underestimating this virus over the past two years, there’s still potential, if you dare to think it, for a more optimistic outcome. South African doctor Angelique Coetzee, who was among the first to suspect the possibility of a different variant, told Reuters that her patients seemed to have “very mild” symptoms when compared with the dominant Delta variant symptoms.

Experts often caution against drawing conclusions from these early and anecdotal reports, since small sample sizes and all sorts of externalities could make these observations irrelevant. The data on Omicron is still extremely new. The variant was identified from samples taken from a laboratory from Nov. 14 to Nov. 16. Nevertheless, Coetzee’s observations should remind investors of the importance of at least accounting for the possibility that Omicron could be mild, before hedging all bets on another economic collapse.

There’s also the possibility that even if the variant is more deadly than the current iterations, vaccines will continue to remain effective, as they were with Delta. However, scientists say they likely won’t know this information for at least several weeks.

For now, Moakes expects transmission rates to go up, since this is one of the ways variants become dominant.

“We should assume it will mean vaccines are less effective in preventing transmission (as was the case for Delta),” he said. “However, there is as yet no evidence that vaccines will be less effective at preventing severe disease, hospitalization, and death, which is the most important thing.”