WASHINGTON - The Pension Benefit Guaranty Corporation selected five investment management firms to participate in its pilot program for Smaller Asset Managers.
The Smaller Asset Managers Pilot Program, announced last year, was created to reduce barriers that smaller investment firms face when competing for the agency's business. Before the pilot program, these contracts were out of reach because the minimum required assets under management, often in the billions, were too large for small firms to qualify.
"We're pleased that after a rigorous competition, five firms stood out and were selected to participate in the program," said PBGC Director Tom Reeder. "We look forward to working with this new group of investment professionals."
Each of the firms will be responsible for investing $175 million in US core fixed income instruments.
The firms are:
- C. S. McKee, LP, Pittsburgh, Pa.
- LM Capital Group, LLC, San Diego, Calif.
- Longfellow Investment Management Co., LLC, Boston, Mass.
- New Century Advisors, LLC, Chevy Chase, Md.
- Pugh Capital Management, Inc., Seattle, Wash.
PBGC selected US core fixed income as the initial asset class for the pilot because research indicates that smaller asset managers are likely to add value relative to the benchmark with these assets. Additionally, the majority of PBGC's assets are invested in fixed income.
The firms will be evaluated on their performance, after fees, against the portfolio benchmark (Barclays Capital US Aggregate Bond Index) over a full market cycle of highs and lows at an acceptable level of risk.
To be considered for the program, firms had to manage a minimum of $250 million in assets, have a five-year performance history, and undergo the same competitive evaluation as other PBGC money managers. Additionally, PBGC limited its allocations to no more than 20 percent of a firm's assets under management, which is in keeping with industry standards.
PBGC protects the pension benefits of more than 40 million Americans in private-sector pension plans. The agency is directly responsible for paying the benefits of about 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 single-employer plans. For more information, visit PBGC.gov.