PBGC Names 6 Firms to Smaller Asset Managers Program

The Pension Benefit Guaranty Corporation has named six investment management firms to join its Smaller Asset Managers Program, which aims to reduce barriers to competition and create opportunities for small investment management firms.

The firms are:

Longfellow Investment Management (Boston);
Merganser Capital Management (Boston);
National Investment Services (Milwaukee);
New Century Advisors (Bethesda, Maryland);
Pugh Capital (Seattle); and
Ramirez Asset Management (New York).

The firms will manage some of the PBGC’s U.S. core fixed-income assets, including U.S. government securities, mortgage-backed securities and corporate bonds, among others. Their performance will be evaluated against the Bloomberg U.S. Aggregate Bond Index.

The PBGC uses institutional investment management firms to invest its assets and relies on their discretion to make investments appropriate for their contractually assigned investment mandates. Although the federal agency does not decide which investments are made, the PBGC requires each manager to adhere to the agency’s prescribed investment guidelines associated with each investment mandate. It also measures investment managers’ performance in comparison with agreed-upon benchmarks.

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The PBGC launched the Smaller Asset Managers Program as a pilot program in 2015; in 2022, the board approved making it an ongoing component of the investment program. Before the program was created, PBGC’s investment management contracts—by its own acknowledgement—were beyond the reach of small firms because the minimum required assets under management were often in the billions of dollars, too high for small firms to qualify.

To be considered for the program today, asset managers must meet the following requirements: have at least $250 million in assets under management, be registered with the Securities and Exchange Commission for the past five years and comply with Employee Retirement Income Security Act standards.

Asset managers also must maintain a positive net worth and acquire an ERISA fidelity bond in the amount of $1 million, which protects the PBGC from losses due to fraud or dishonest practices. Additional insurance includes errors and omissions coverage valued at a minimum of $2 million. Asset managers are also required to act as a fiduciary and always work in the best interest of the PBGC.

According to the agency, the six companies were chosen based on a competitive procurement process and were subject to the same diligence, risk management and reporting requirements as larger asset managers working for the PBGC. It also noted that Longfellow Investment Management, New Century Advisors and Pugh Capital return after being part of the original pilot program.