Mass PRIM picks HedgeMark for managed account mandate

August 11, 2014  

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By Kristen Schultheiss

The $59 billion Massachusetts Pension Reserves Investment Management Board (Mass PRIM) has chosen HedgeMark to be its provider of hedge fund managed account services due to its competitive fee proposal. HedgeMark proposed a fee of 15 basis points of assets under management, which Mass PRIM considered highly competitive as it was one of the lowest bids received.

The Massachusetts pension fund released a request for proposal (RFP) in late January 2014 with separate bids possible for hedge fund advisory services and managed account services. 

In June, Mass PRIM announced its decision to hire Arden Asset Management as its hedge fund adviser for a flat $750,000 annual fee. 

Cliffwater was the pension fund’s previous hedge fund adviser and board documents noted that Cliffwater’s annual fee schedule totalled $1.7 million for fiscal year 2014.

With respect to the managed account services portion of the RFP, Mass PRIM’s search committee narrowed the 14 responses it received to seven finalists, which included Arden Asset Management, HedgeMark (a BNY Mellon company), Lighthouse Investment Partners, Lyxor Asset Management, Pacific Alternative Asset Management Company, Sigma Analysis & Management, and The Rock Creek Group. Finalists were interviewed at Mass PRIM’s offices in April.

According to the pension fund’s documents, the evaluation committee recommended HedgeMark to the investment committee unanimously – with the decision being based on the firm’s experience, stability and depth of the proposed team; the quality and suitability of the managed account services infrastructure; the risk and performance technology and data process; and the fee proposal.

HedgeMark was fully acquired by BNY Mellon in May 2014, and BNY Mellon is Mass PRIM’s current custodian. Therefore choosing HedgeMark also allowed for the greatest business stability within the pension fund, according to Mass PRIM.

HedgeMark was created in 2009 to provide customised hedge fund managed account solutions to institutional investors. The firm also has a risk analytics platform to offer high-frequency risk and performance reporting.

Currently, the managed account solutions provider has 14 managed accounts valued at roughly $1 billion. It also runs sub-set managed account services such as risk, performance and guideline monitoring for 75 US liquid alternative mutual funds valued at more than $4.5 billion, and provides risk transparency on nearly 370 commingled hedge funds with assets under management of $300 billion.

The HedgeMark team is comprised of more than 100 experienced professionals, including Andrew Lapkin – the firm’s president, who was also the founder of Measurisk in 1998 – and Josh Kestler, chief operating officer, who previously held the position of head of the alternatives managed account platform operations in the US at Deutsche Bank in New York.

Mass PRIM was also attracted to HedgeMark for its "open architecture" platform, which allows the pension to choose hedge fund managers, service providers, fund structures, counterparties and investment guidelines.

With HedgeMark’s technology, Mass PRIM and its adviser will have the ability to view high quality, daily risk and performance data. Mass PRIM can customise HedgeMark’s reporting methods as well.

Massachusetts PRIM has a 10% allocation to hedge funds, which is approximately $6 billion, and 15% of the hedge fund programme is allocated to FoHF manager PAAMCO. Its overall asset mix is listed as 43% global equity, 13% core fixed income, 10% hedge funds, 10% value-added fixed income, 10% private equity, 10% real estate and 4% timber/natural resources.

Single-manager hedge funds in the portfolio include Anchorage Capital Partners, Arrowgrass Capital Partners, Ascend Capital, BlueCrest Capital Management, Brevan Howard Asset Management, Brigade Capital Management, Cantab Capital Partners, Capula Investment Management, Claren Road Asset Management, Davidson Kempner Capital Management, Elliott Management, Highfields Capital Management, Indus Capital Partners, King Street Capital Management, Och-Ziff Capital Management, Pershing Square Capital Management, Samlyn Capital, Steadfast Capital Management, Taconic Capital Advisors, Winton Capital Management and York Capital ( InvestHedge, May 2014). 

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