Third Quarter 2017 Update
November 19, 2017
The September quarter was strong, and despite the frequent weather and political storms affecting the United States, the overall economy is little changed since the last Board meeting. Economic indicators are still mostly strong, equity markets continue to move higher, to new records, while bond yields remain low and inflation is absent. The overall health of the economy remained on an upswing, even while several economic indicators were affected by the storms. National employment measures, automobile sales, retail sales and home building statistics all exhibited anomalies in the quarter, but are expected to rebound. More important, the September 2017 quarterly Gross Domestic Product (GDP) growth came in at 3%, annualized, beating expectations of 2.5% and only slightly below the 3.1% reported in the June 2017 quarter, which was revised upward.
The consensus GDP forecast for the year remains at approximately 2.1%, up from 1.6% reported last year. Financial markets around the world have performed strongly.
In this environment, the PRIT Fund has performed well:
As of September 30, 2017, the PRIT Fund net asset value stood at $69.5 billion. For the one-year ended September 30, 2017, the PRIT Fund was up 13.0% gross (12.5% net), outperforming its benchmark by 187 basis points (138 net).
- This performance equates to an investment gain of $7.9 billion, net of fees.
- This outperformance equates to $872 million of value above the benchmark return, net of fees.
- Six of the seven major asset classes outperformed their respective benchmarks.
- Net total outflows to pay benefits for the one-year ended September 30, 2017, were approximately $1.5 billion.
Sarah Samuels, CFA, CAIA, Deputy Chief Investment Officer, left PRIM to take a position as Managing Director at the Investment Office of Wellesley College, effective September 1, 2017. Her contributions to PRIM were truly exceptional and she will be missed.
Soon after Sarah’s departure, we announced that David Gurtz, CFA, CPA, returned to the investment team to fill the role of Deputy Chief Investment Officer – Director of Public Markets, after more than two years as Chief Operating Officer (COO) and Chief Financial Officer (CFO). Prior to serving as PRIM’s COO and CFO, Dave served as Deputy Chief Investment Officer – Director of Risk Management, and is largely responsible for building the risk management program here at PRIM.
Additionally, as Deputy Chief Investment Officer, Dave played an important role in the due diligence and manager selection processes across PRIM asset classes, including in the public markets portfolio, and his knowledge of the managers in the public markets portfolio will ensure continuity. Dave joined PRIM in 2008 and has been an invaluable team member in a variety of key roles; we have the utmost confidence that he will lead the Public Markets group effectively.
We also announced three promotions to fill the vacancy created by Dave’s return to the investment team. We are fortunate to have a deep bench of talent on the finance team from which to fill the roles of Chief Operating Officer and Chief Financial Officer. As a manager, it is extremely gratifying to be able to promote high-performing staff members into leadership positions.
First, Anthony (Tony) Falzone was promoted to Chief Operating Officer (COO). Tony will report to me and oversee PRIM’s entire finance, operations, reporting, compliance and technology functions. Tony has more than 25 years of finance, investment operations and technology experience. He joined PRIM as a Senior Financial Analyst in 2006 from BNY Mellon Custody Services, where he directly supported PRIM for seven years. As Senior Financial Analyst at PRIM, Tony was responsible for real estate, timberland and private equity valuations, fee calculations and reporting. He served in that role until 2009, when he was promoted to Director of Private Investment Accounting, responsible for the oversight of PRIM’s alternative investments, including real estate, private equity, hedge funds and timberland. Also during that time, Tony returned to school part-time and earned his degree in Computer Information Systems. In 2013, Tony became PRIM’s Chief Technology Officer. In that role, Tony upgraded and maintained PRIM’s entire information technology infrastructure and designed and deployed PRIM’s disaster recovery, business continuity, mobile device-management and cyber-security platforms. Tony is a consummate team-player, is well-regarded by the entire PRIM staff and brings a unique combination of skills and experience to his new role.
Deborah Coulter, CPA, was promoted to CFO. Reporting to the COO, Deb will be responsible for managing the PRIM Board’s non-investment financial activities including: budgeting, corporate accounting, audits, taxation, cash management and office administration. Deb rejoined PRIM in April 2016, as the Director of Strategic Initiatives on the finance and operations team, to focus on a variety of initiatives, including developing procedures to comply with the new Public Records Law and implementing new human resources policies designed to broaden the diversity of PRIM staff.
Deb has more than 25 years of experience in investment management, financial management and public accounting. Immediately prior to rejoining PRIM, Deb was the Assistant Controller in Corporate Accounting at the Baupost Group, a Boston-based absolute return investment manager. Prior to that, Deb was PRIM’s Director of Finance and served as Interim Chief Financial Officer when our former CFO was on a medical leave of absence. And prior to that, Deb spent the majority of her 15-year career at Essex Investment Management as Controller and Compliance Manager.
Matthew Liposky was promoted to Chief Investment Operating Officer (CIOO). Also reporting to the COO, the CIOO is responsible for managing the PRIT Fund’s financial activities including: investment performance reporting; investment accounting; compliance; and investment manager onboarding, including contract negotiation and administration (with PRIM’s General Counsel). Matt joined PRIM in 2013 and has more than 10 years of experience in investment operations. Prior to joining PRIM, Matt was Senior Operations Analyst at Liberty Mutual Investment Group and Supervisor at BNY Mellon, where he directly serviced PRIM. Matt has been invaluable in the operational implementation of PRIM’s award-winning managed account platform. During his tenure at PRIM, he has worked closely with the entire PRIM investment staff to successfully onboard all new investments and initiatives and to ensure that PRIT Fund performance reporting is timely and accurate.
And last, please note that Tony will soon commence a search to fill two important roles on his team, the Director of Human Resources (HR) and the Director of Information Technology. Deb and Dan Eckman, Director of Finance and Administration, had been splitting the role of HR effectively for the past 18 months, but with these moves, we believe it is now time to hire a full-time HR professional.
In other organizational news:
Tim Schlitzer, CRE, CFA, Senior Investment Officer – Director of Real Estate and Timberland Investments, was honored earlier this fall with the Treasurer’s Citation for Excellence. Prior recipients of the award include Chris Supple, Dave Gurtz and Paul Todisco.
Morgan Burns, an accounting assistant at PRIM, received his CFA Charter. This is a major accomplishment that requires passing three difficult exams and working in the industry for a requisite four years.
Carlo Scarpa, PRIM’s help-desk specialist, just passed the examination for the CompTIA Security+ certification. Carlo adds this credential to his existing A+ and Net+ certifications from the same highly-regarded organization.
Maria Clements joined PRIM as an Administrative Assistant where she will work closely with the Private Equity team. Maria joins PRIM from State Street Global Advisors where she was an Executive Administrative Assistant and prior to that, Maria worked in administrative support and special education in the Rockport Public Schools. Maria has degrees from Endicott College and Salem State University.
Catalina Marino joined PRIM as and Administrative Assistant and will be at the front desk where she will serve as receptionist and also perform other office administration duties. Catalina started in July on a temporary basis before coming on board full-time in September. Catalina is a graduate of Eastern Nazarene College.
In the area of national recognition:
PRIM has been nominated for “Team of the Year” by Institutional Investor Magazine. The award will be announced in late November in New York at the magazine’s “Allocators’ Choice Awards.” The list of the half-dozen finalists includes some extremely well-regarded investment teams from endowments, foundations and corporate pension offices. The only other public fund finalist is the State of Wisconsin Investment Board (SWIB), which we’ve often discussed is another very innovative public fund. In fact, during the first phase of Project SAVE, SWIB was one of the funds PRIM staff (and Investment Committee member Tim Vaill) visited.
Additionally, Eric Nierenberg, Ph.D., Chief Strategy Officer, has been nominated for the “Next CIO” at the same Institutional Investor Magazine awards event. He and other nominees will answer questions from audience members at the beginning of the evening. Audience members will then vote, based on the nominees’ answers, for the “Next CIO.” The winner will be announced at the awards dinner later that evening.
Last, Trusted Insight, a global network of institutional investors, recently named Michael Trotsky, CFA, Executive Director and Chief Investment Officer, one of its 2017 “Top 30 Public Pension Chief Investment Officers.” After reviewing the performance of public pension funds across the country, Trusted Insight selected honorees based on superior 1-, 3, and 5-year performance and “industry leading investment strategies.”