Executive Director's Corner
February 24, 2012 at 7:06 AM
Each year, in February, PRIM Staff presents annual strategic plans to the Board. These plans outline our goals for the coming year and are the culmination of work that begins each fall with in-depth internal discussions and careful analysis of guidance obtained from our outside consultants and vendors. The following is a summary of the 2012 Annual Plans that were approved at the February 7, 2012 Board meeting.
- Capital Markets Assumptions – The Capital Markets return assumptions have been revised for 2012. The 2012 PRIM Portfolio 5 – 7 year expected return is 7.9%, up from 7.7% in 2011. The 30-year expected return is 8.4%, down from 9.1% in 2011.
- Investment Team Reorganization – The annual plan includes a new Senior Investment Officer of Hedge Funds, and the new role of Director of Strategic Initiatives.
- Hedge Funds - The annual plan includes the continued expansion of the Direct Hedge Fund program. In 2012, staff will determine the future role of Hedge Fund of Fund managers.
- Private Equity – The annual plan includes a commitment of $1B in new capital to the private equity program, $500 million in private debt, and the hiring of two investment team vacancies.
- Real Estate – The annual plan includes the deployment of $650 million in committed capital, completion of $273 million in dispositions, formulation of a strategy on portfolio leverage, continued expansion in non-core real estate opportunities, and a complete analysis of the current REIT strategy.
- Risk Management – In addition to continued development of the previously introduced portfolio risk dashboard, the team will work to integrate the Barra risk management tool into investment decision making processes such as: manager selection, manager monitoring, portfolio rebalancing, and risk budgeting. Risk Management will also oversee the partnership with the Massachusetts Institute of Technology (MIT).
- Pro-active manager monitoring – To ensure that we have identified and have access to the best possible investment managers, the Public Markets team will focus efforts on developing a more nimble and pro-active search process.
- Emerging Managers Program – The investment team will build a process to identify and source emerging investment managers, including minority and women-owned firms.
Finance, Operations and Technology Highlights
- Office Space Expansion – The annual plan includes plans to expand office space in order to accommodate increased Board meeting attendance and additional staff.
- Foreign Exchange and Direct Hedge Fund Support – The finance staff will develop and implement back office support, accounting, and reporting support for the two new initiatives.
- Board Governance Review – The annual plan includes the completion of a full PRIM Board Charters review.
- Compensation Committee Support – The annual plan includes support for the newly formed Compensation Committee.
- State Retiree Benefits Trust Fund (SRBT) Integration – The assets of the SRBT Fund, managed by the Health Care Security Trust (HCST) Board have been transitioned into the PRIT Fund. PRIM staff will support the introduction of new SRBT clients.
- Technology Plans
a. Develop and deploy business continuity and disaster recovery plans.
b. Develop strategic 3-5 year technology plan.
c. Continue previously budgeted technology upgrade.
CFA Institute Asset Manager Code of Conduct
As you may remember, last year I was appointed to the CFA Institute’s Advisory Board to develop and deploy the CFA Institute’s Asset Manager Code of Conduct (AMCC). The CFA Institute Asset Manager Code of Professional Conduct sets a common bar for professional conduct, allowing investors to assess manager commitment to principles that affirm client interests. While it isn’t likely the final word in manager evaluation, increasingly it is a starting point for singling out managers who back up marketing patter with real commitment to high standards of conduct. In our procurements, we now ask all potential investment managers whether they comply with the AMCC. You can watch a video interview of me explaining the benefits of the AMCC on the PRIM website at the following link. The video interview also appears on the CFA website.