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
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
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
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).