PBGC Launches Pilot Program for Smaller Asset Managers
FOR IMMEDIATE RELEASE
May 20, 2015
WASHINGTON - The Pension Benefit Guaranty Corporation recently announced a Smaller Asset Managers Pilot Program to reduce barriers to competition faced by such firms while maintaining rigorous investment risk and control standards.
Earlier this month, PBGC published a pre-solicitation notice for smaller asset managers to invest in a U.S. fixed income portfolio with allocations ranging from $50 million to $250 million.
This program creates new opportunities for smaller asset managers by reducing the required amounts of the assets they manage and their mandates.
Before the pilot program, these contracts were out of reach to the firms because the minimum amounts of the investments, often in the billions, were too large for the firms to accommodate.
PBGC selected US core fixed income as the initial asset class for the pilot because research shows there is a good chance of finding smaller asset managers that are able to add value relative to the benchmark with these assets. Additionally, the majority of PBGC's assets are invested in fixed income.
"I am pleased that we are opening competition to smaller asset managers through this pilot program," said PBGC's Chief Management Officer Alice Maroni.
Eligible firms must have a minimum of $250 million in assets under management, a five-year performance history, and undergo the same competitive evaluation as other PBGC money managers. Additionally, PBGC will limit its allocations to no more than 20 percent of a firm's assets under management, which is in keeping with industry standards.
Under the pilot program, PBGC anticipates two-to-three awards and could select up to five firms.
Once the firms are selected, and after fees are paid, they should outperform the portfolio benchmark (Barclays Capital US Aggregate Bond Index) over a full market cycle of highs and lows at an acceptable level of risk.
PBGC will host a pre-bidder's conference on Monday, June 8, 2015 at PBGC's headquarters: 1200 K Street NW, Washington, DC 20005 at 9 a.m. East Coast Time. Parties interested in the pre-bidding conference should RSVP to firstname.lastname@example.org no later than June 1, 2015.
The pre-bidding conference was created to specifically help smaller asset firms understand the procurement process that PBGC uses to select money managers - a process that is unfamiliar to many smaller firms. PBGC expects to post a Request for Proposals in mid-June.
"We encourage firms that are interested in the pilot program to attend because we want to help people who haven't done this before," said PBGC's Chief Investment Officer John Greenberg.
PBGC protects the pension benefits of more than 41 million Americans in private‐sector pension plans. The agency is responsible for more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums, investment income, and with assets and recoveries from failed plans. For more information, visit PBGC.gov.
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PBGC No. 15-04