Executive Director's Corner

December 2016 Update

December 07, 2016 at 9:47 AM

Market Analysis
The U.S. Presidential election has had a major impact on financial markets worldwide. To date, markets seem to be focused on the possible impacts of several pro-growth components of the nascent Trump platform and to a lesser extent on possible constricting polices. Tax reform, fiscal stimulus, infrastructure spending and deregulation, if and when implemented, are expected to boost growth and are the factors driving both U.S equity markets and bond yields higher. Foreign markets are generally lower, along with the value of their currencies relative to the dollar. Longer-term impacts from Trump policies pertaining to trade, tariffs and immigration – which many believe could dampen growth − are not currently dominating market sentiment but are a reason to remain cautious.

At the time of this writing, with the election behind us and economic conditions improving slightly, U.S. large capitalization equities are up nearly 4% in the month of November, U.S. small capitalization equities are up nearly 14%, while foreign equities are down between 2 and 5%. Both the Dow and the S&P have hit new, all-time highs, while bond yields have spiked in anticipation of future higher inflation and interest rates. The 10-year U.S. Treasury, yielding 2.35%, is well off its recent record low of 1.37%, which occurred in July.

There are many uncertainties and risks in the economy that will undoubtedly lead to volatile markets. Fortunately, PRIM staff is deep into its annual asset allocation work and will have recommendations at the next Investment Committee and Board meetings. We have built a portfolio designed to perform well in all market environments and we shy away from making bold predictions. Yet, we enter this asset allocation study with our eyes wide open – there are likely to be positives and negatives, winners and losers, before there is much more certainty. For this reason, we are confident in the current PRIT Fund portfolio, which has been designed to perform well in changing economic environments.

PRIT Fund Performance
As of September 30, 2016 the PRIT Fund net asset value stood at $63.2 billion. The PRIT Fund’s returns remain strong both on an absolute and on a relative basis.

For the Q1 FY 2017 ended September 30, 2016, the PRIT Fund was up 4.3%, slightly outperforming the total core benchmark of 4.2%.

  • This performance equates to an investment gain of $2.6 billion over the quarter.
  • This outperformance equates to $6 million of value above the benchmark return.
  • Six of the seven major asset classes outperformed their respective benchmarks.

For the one-year ended September 30, 2016, the PRIT Fund was up 10.8%, underperforming the total core benchmark of 11.1% by 25 basis points.

  • This performance equates to an investment gain of $6.4 billion
  • This underperformance equates to $146 million of value below the benchmark return.
  • Five of the seven major asset classes outperformed their respective benchmarks.

Net total outflows to pay benefits for the one-year ended September 30, 2016 were approximately $1.6 billion

Organizational Update
Alyssa Fiore joined the Private Equity team as an Investment Analyst reporting to Michael Bailey on October 11, 2016. Alyssa joins us from Duff and Phelps where she was a Senior Associate in Valuation Services. She graduated from Bentley University with a Bachelor of Science degree in Finance and Global Perspectives. She has passed Level I and Level II of the CFA exam.

Samuel Olivier joined the Client Services team as a Client Services Analyst reporting to Paul Todisco on October 11, 2016. Sam joins us from Fidelity Investments where he was a Fund Accounting Analyst and Senior Pension Specialist. He graduated from Bellevue University with a Bachelor of Science degree in Security and Risk Management and from Southern New Hampshire University with a Masters in Finance degree. Sam served in the U.S. Army National Guard from 2004 through 2011.

Edward Wang joined the Hedge Fund team as an Intern reporting to Eric Nierenberg on October 10, 2016. Edward recently graduated from MIT with a Masters in Finance degree. He received a Bachelor of Arts degree in Mathematics and Economics from Carlton College, graduating Magna Cum Laude.

In a ceremony in Boston in early November, Tim Schlitzer, Senior Investment Officer and Director of Real Estate and Timberland, and Bill Lee, Investment Officer on the Hedge Fund team, received their CFA charters, having passed all three tests and completed the work requirements.
Michael McGirr, Senior Investment Officer on the Private Equity team, was recently selected to join the Research and Benchmarking Committee of the Institutional Limited Partners Association (ILPA), the industry group for private equity limited partners.

Sarah Samuels, Deputy CIO, recently earned the Chartered Alternative Investment Analyst (CAIA) designation after passing the required two-part exam. The CAIA curriculum is designed to provide a broad knowledge in alternative investments including hedge funds, private equity, real assets and structured products.

David Gurtz, CFO and COO, and Paul Todisco, Senior Client Services Officer, received the Commonwealth Citation for Outstanding Performance at a September State House ceremony with Treasurer Deborah Goldberg, Chair of the PRIM Board.

The PRIM Advisory Council held its inaugural meeting on November 4, 2016. The new advisory council consists of representatives from participants who invest all or a portion of their assets in the PRIT Fund. The council consists of seven members from around the state who will serve two-year terms. The council will provide our clients with a forum to provide regular feedback to me, which I will regularly report back to the Board, Committees, and staff.

Tags: PRIT Updates
Category: Updates