MassPRIM Seeks Savings On, Control Over Hedge Portfolio

Jun 19 2014 | 9:06am ET

The head of Massachusetts’ main public pension fund says he won’t pay for luck—and would prefer to pay less for everything else, as well.

Michael Trotsky is overseeing the transformation of the Massachusetts Pension Reserves Investment Management’s hedge-fund portfolio, shifting money out of funds of hedge funds and into direct hedge fund investments. That process is still underway, but Trotsky is already looking towards the next step: separately-managed accounts.

“That’s the next frontier and we might be at the forefront of it,” Trotsky told Reuters. “It will give us full transparency and the ability to better control the assets.”

Transparency and control aren’t the only things on Trotsky’s mind; cost isn’t far from it, either.

“We love to find skillful managers and we’re happy to pay fees for that,” Trotsky told Bloomberg News. “We’re unwilling to pay for beta exposure or luck.”

MassPRIM is pushing for fee reductions that could save it $7 million per $100 million invested, Trotsky said. And the $59 billion pension is also looking at hedge-fund replication strategies to lock in further savings.

“I value a basis point of cost reduction more highly than a basis point of return,” he said. “We don’t know from year to year what the markets will return but we can predict with a lot of accuracy what our cost structure will be.”

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