NewsmakersDecember 1, 2021

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

The pension fund’s board will vote Dec. 2 on whether to approve the recommendation from its investment committee.

Reported by Michael Katz

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.

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.